Fitch Ratings has raised its forecast for China’s economic growth in 2023 to 5%. This is an upward revision from the previous forecast of 4.7% made in December 2020. The ratings agency noted that the Chinese economy is expected to benefit from an improvement in domestic demand and an increase in foreign direct investment. In addition, Fitch expects China’s export activities to continue to rebound, with potential risk of inflationary pressures. Despite this, the agency believes that the Chinese government will be able to manage inflation expectations.
(Reuters) – Ratings agency Fitch has revised its forecast for China’s economic growth in 2023 to 5.0% from a previous 4.1% as consumption and broader activity recover faster after the end of the ‘zero-COVID’ regime than originally expected.
Fitch said the recovery is primarily being led by consumption, noting that many high-frequency indicators have recovered recently but are still below pre-pandemic levels
norms.
Despite the forecast upgrade, the rating agency expected the economic recovery this year to be less vigorous than in 2021, when the economy posted 8.4% GDP growth.
Fitch was the first major rating agency to upgrade China’s 2023 economic growth forecast. S&P Global expected the economy to stay on track in 2023 to deliver GDP growth of 4.8%, in line with November’s baseline scenario, while Moody’s kept its November forecast of 4.0% growth.
“This reflects in part the continued weakness of the property
Market that showed little sign of improving sales or housing starts in late 2022, despite increasing political support,” Fitch said in a statement.
In addition, net trade could become a drag on economic growth in 2023, Fitch added, as export demand is weighed down by the economic slowdown in the United States and Europe.
The direction of fiscal policy remains uncertain ahead of a March parliamentary session, Fitch said.
Premier Li Keqiang promised last week that despite difficulties and challenges, the government will work to consolidate and expand the momentum of economic recovery.
Fitch does not expect aggressive macro-policy easing and projects a fiscal deficit of around 7% of GDP in 2023, up from an estimated 8% in 2022.
Policymakers plan to step up support for domestic demand this year but are likely to stop spending large sums on direct consumer subsidies and continue to focus mainly on investment, Reuters previously reported.
(Reporting by Shivani Tanna in Bengaluru and Ellen Zhang in Beijing; Editing by Shri Navaratnam)
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