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Thursday, February 2, 2023

2022 economic growth plummeted to one of its worst levels in half a century

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The gross domestic product (GDP) grew by 2.9% in October-December compared to the previous yearr, as data from the National Statistics Office (ONE) showed on Tuesday, at a rate lower than the 3.9% in the third quarter. Still, the rate beat the 0.4% expansion in the second quarter and market expectations for a 1.8% rise.

Beijing’s sudden relaxation of strict anti-virus measures has boosted expectations of an economic revival this year, but has also caused a sharp rise in COVID casesaccording to economists, could hamper growth in the short term. The fall in the real estate sector and weak global demand mean that the recovery of growth depends to a large extent on consumers.

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China’s 2023 will be eventful; not only will it have to overcome the threat of new waves of COVID-19, but the worsening of the real estate market residential development in the country and weak global demand for its exports will be significant deterrents,” Harry Murphy Cruise, an economist at Moody’s Analytics, said in a note.

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By 2022, GDP expanded by 3.0%, well below the official target of “around 5.5%” and sharply halting 2021’s 8.4% growth. If the 2.2 expansion is excluded % after the initial shock of COVID in 2020, is the worst result since 1976, the final year of the decade-long Cultural Revolution that wracked the economy.

“December activity data surprised broadly to the upside but remains weak, particularly in demand-driven segments such as retail spending,” Louise Loo, an economist at Oxford Economics, said in a note.

“So far, the data confirms our view that China’s reopening momentum will be somewhat anemic at first, with consumer spending one of the main laggards in the early stages,” Loo said.

What is expected for 2023

A Reuters poll Growth is expected to pick up to 4.9% in 2023 as Chinese leaders address some of the main drags on growth: the “zero COVID” strategy and a severe recession in the real estate sector. Most economists expect growth to pick up starting in the second quarter.

A strong rebound in China could temper an expected global recession, but it could also cause more inflationary headaches around the world just as policymakers are beginning to rein in record price rises.

“The current ‘exit wave’ of China’s faster-than-expected reopening has taken a heavy toll on economic activity in recent months, due to to rising infections, temporary labor shortages and supply chain disruptionsGoldman Sachs economists noted, noting annual contractions in steel and cement production in December.

China is likely to aim for economic growth of at least 5% in 2023 to keep unemployment at bay, according to regulators.

Source: Ambito

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