Major banks cut China 2023 GDP forecasts as recovery falters

Published Fri, Jun 16, 2023 · 01:27 PM

Data on Thursday showed China’s economy stumbled in May with industrial output and retail sales growth missing forecasts, adding to expectations that Beijing will need to do more to shore up a shaky post-pandemic recovery. PHOTO: ST FILE

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FOUR major Western banks have cut their 2023 gross domestic product (GDP) growth forecasts for China after May data showed a post-Covid recovery was faltering in the world’s second-largest economy.

UBS, Standard Chartered, Bank of America (BoA) and JPMorgan now expect China’s GDP growth to be between 5.2 per cent and 5.7 per cent this year, down from an earlier range of 5.7 per cent to 6.3 per cent.

Data on Thursday showed China’s economy stumbled in May with industrial output and retail sales growth missing forecasts, adding to expectations that Beijing will need to do more to shore up a shaky post-pandemic recovery.

The government has set a modest GDP growth target of around 5 per cent for this year after badly missing its 2022 goal.

UBS economists on Friday cut their GDP forecast to 5.2 per cent from 5.7 per cent and said in a note that they expected more policy support to come.

China’s central bank on Thursday cut the interest rate on its one-year medium-term lending facility, the first such easing in 10 months, paving the way for cuts in the benchmark loan prime rates (LPR) next week.

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Economists at Standard Chartered lowered their 2023 growth forecast to 5.4% per cent from 5.8 per cent previously.

“Additional stimulus likely to be measured, as China prioritises improving business climate and confidence,” the economists said in a note.

Standard Chartered lowered its forecast for China’s second-quarter growth to 5.8 per cent from 7 per cent.

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The April-June growth is widely expected to be boosted by a low base of comparison given there were widespread Covid-19 lockdowns a year earlier.

BofA downgraded its 2023 GDP growth forecast to 5.7 per cent from 6.3 per cent, while JPMorgan had earlier trimmed its outlook to 5.5 per cent from 5.9 per cent.

China will roll out more stimulus to support a slowing economy this year, but authorities are likely to focus on shoring up weak demand in the consumer and private sectors, sources involved in policy discussions said. REUTERS

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