BEIJING, June 26 (Reuters) – S&P Global cut its forecast for China’s economic growth this year, highlighting the uneven nature of the country’s reopening recovery, increasing calls for further stimulus.
S&P now expects China to deliver GDP growth of 5.2% in 2023, down from a previous estimate of 5.5%. It was the first such cut this year by a global credit rating agency and follows lower forecasts from Goldman Sachs and other major investment banks.
“China’s main downside growth risk is that the recovery loses momentum amid weak consumer and housing confidence,” S&P said in a statement Sunday.
The world’s second-largest economy has slowed in recent months after bouncing back to life with the lifting of three years of restrictive zero-COVID policies. In May, real estate investment continued to decline, industrial production and retail sales growth fell short of forecasts and youth unemployment reached a record 20.8%.
Forecasts for China’s GDP growth this year range between 4.4% and 6.2%.
S&P said likely measures to strengthen the economy could include “easing housing purchase restrictions and mortgage down payment requirements, expanding credit and infrastructure financing and perhaps fiscal support for consumption.”
Ning Jizhe, a senior economic official at the country’s top political advisory body and former head of China’s statistics agency, is among policy advisers calling for more supportive measures.
“It is better to introduce measures sooner rather than later,” he said at a forum in Beijing on Sunday, adding that the impact of the measures “should not be small”.
Last week, China cut its major credit benchmarks, the first such cuts in 10 months. A week earlier, the People’s Bank of China (PBOC) cut its short- and medium-term policy rate.
The world’s second-largest economy will roll out more stimulus this year, sources involved in policy discussions say.
Last week, three major state-run securities newspapers ran front-page articles citing economists who said the PBOC is likely to ease monetary policy further.
And on Sunday, the state-controlled Global Times painted a grim picture of the economy, reporting that many college graduates are visiting temples to pray amid mounting concerns about finding jobs.
Markets generally expect the stimulus policies to be revealed after a regular meeting of the Communist Party’s political bureau in July.
“The government is allowing more calls from state media to prepare public opinion for that (politburo) meeting and raise expectations (for more stimulus),” said Nie Wen, a Shanghai-based economist at the investment firm Hwabao Trust.
Further highlighting pessimism about the economy, stocks in China and Hong Kong collapsed on Monday following disappointing domestic tourism data ahead of last week’s three-day Dragon Boat Festival, while the yuan also weakened against the dollar.
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