China's economic growth now seen below 5% through 2024 on Covid zero risk

China’s economic growth outlook is darkening, with economists downgrading their forecasts through 2024 as many bet Beijing will take a slow approach to dropping its Covid Zero policy.  
 

Growth is now expected to be below 5% for each year through 2024, the latest Bloomberg survey of economists shows. The median forecast for this year was lowered to 3.3% from 3.4% in the previous survey, while next year’s was cut to 4.9% from 5.1%. In 2024, the economy is seen expanding 4.8%, down from the 5% projected earlier. 

China’s zero-tolerance approach to combating Covid infections has been a major drag on the world’s second-largest economy, with frequent lockdowns and regular testing making consumers wary of traveling and spending, while businesses contend with ongoing disruptions. On top of that, the worst housing market slump on record is rippling through sectors like construction and banking. 

The Communist Party’s recent congress provided no clues that Covid Zero will be abandoned, adding to investors’ worries about China’s outlook and fueling a slump in the stock market and the yuan. 

The Bloomberg survey showed that most economists -- 11 of 18 respondents -- expect China to reopen its borders only in the first half of next year. The rest predict a reopening only starting from the second half through to the first quarter of 2024. Some overseas investors, like Mark Mobius, say China could ease its Covid policy by the end of this year, although many experts are less sanguine. 

“As we do not expect a quick turnaround in Covid-19 policy following the Chinese Communist Party summit, and with the property sector still in the doldrums and global growth coming down sharply, we have lowered our growth forecasts,” said Arjen van Dijkhuizen, a senior economist at ABN Amro Bank NV. He now sees growth of 3.5% next year and 5.2% expansion in 2023.

Some 60% of the economists surveyed saw China’s delayed reopening as the biggest threat to economic growth, with 30% citing the slowdown in global growth.

On inflation, economists see a weaker outcomes for consumer and producer prices in the fourth quarter compared with earlier predictions. Consumer inflation will likely average 2.7% in the final quarter, while producer inflation will be zero, the latest forecasts show. 

Economists raised their estimates for export growth slightly for the fourth quarter to 3.7% from 3.1%, while cutting their predictions for imports sharply to 0.5% from 2.9%. Retail sales are now expected to reach 4% from 4.8% in the previous survey. 

“Consumption remains a weak link amid the zero-Covid stance, with its growth outlook darkening,” said Bernard Aw, an economist for Asia Pacific at Coface SA, who now predicts 3.2% for this year.