China’s economy is facing its worst downturn since spring 2020, when it was hit by the first wave of Covid-19, according to Nomura Holdings Inc.
China’s growth slower worsened in the first quarter and markets should worry about further slippage in the second quarter, economists at Nomura Holdings Inc. wrote. including Lu Ting in a note on Saturday. Economic activity “may deteriorate significantly in all sectors” in March, exacerbated by growing nationwide mobility constraints and the continuing recession in the real estate sector, they said.
With epidemics cracking down on a wide range of sectors, including private services, construction and some manufacturing, it is becoming increasingly difficult for Beijing to meet its GDP growth target of “around 5.5%” for in 2022 “, the economists reported.
The investment bank cut its estimate for China’s growth from April to December, citing the deteriorating Covid-19 situation. While economists have revised upwards their expectations for the first three months to 4.2%, they note that their current forecast of 2.9% may reflect the “real economic situation on the ground” quite well.
The upward revision mainly shows the surprisingly strong official data for the period January-February. It did not lead to a change in the bank’s forecast for the whole year, which stands at 4.3%.
China’s economy had a stronger-than-expected start to the year, with consumer spending, investment and industrial output exceeding forecasts. The outlook, however, has become increasingly bleak as the country battles Covid’s worst outbreak since appearing in Wuhan two years ago and Russia’s invasion of Ukraine disrupts global financial markets and energy prices. .
Production at Shenzhen’s technology and construction hubs and the city of Changchun Automobile have been disrupted by virus control, and residents of Shanghai’s financial center have been asked to stay indoors as the city conducts mass testing rounds.
China reported 5,600 new cases of Covid-19 virus on Saturday, the most daily infections in more than two years.
Despite the impressive official activity figures, economists wrote, policymakers are likely to “further increase relaxation measures to curb what is actually a deteriorating growth slowdown”. They expect the central bank to reduce the banks’ required reserve ratio by 50 basis points over the next two months, as well as the annual medium-term lending facility rate and the interest rate of 7-day reversible repurchase agreements by about 10 basis points in April.
It is also possible that Beijing will allow more local governments to ease local property restrictions, they said.
Source: Capital
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