Fitch Ratings has raised its economic growth forecast for China in 2023 to 5%, up from its previous forecast of 4.7%. The rating agency attributes the upgrade to a recovery in domestic demand, supported by fiscal and monetary policy easing, and a faster-than-expected rebound in exports. The Chinese economy is expected to grow by 8.2% in 2021, with growth moderating to 6.4% in 2022, according to Fitch. The Chinese government’s target for economic growth this year is above 6%.
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Feb 8 (Reuters) – Rating 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 pick up after the end of the ‘zero-COVID’ Regimes recover faster than originally expected.
Fitch said the recovery is primarily being led by consumption, noting that many high-frequency indicators have rallied recently but still remain below pre-pandemic 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 in the housing market, which has shown little sign of improving sales or housing starts in late 2022, despite rising 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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