Goldman cuts China’s growth forecast for 2023 as COVID-zero policy remains

Goldman Sachs Group Inc. cut its 2023 economic growth forecast for China sharply, predicting Beijing will stick to its stringent COVID- Zero policies through at least the first quarter of next year.

Gross domestic product will probably increase 4.5 percent in 2023, down from a previous projection of 5.3 percent, Goldman’s economists led by Hui Shan wrote in a note. This year’s prediction of 3 percent was maintained.

China is unlikely to begin reopening before the second quarter of next year as it tries to put several steps in place first, such as higher vaccination rates for elderly and increased manufacturing of cheap and effective COVID-19 pills, Goldman said.

The authorities may also want to wait until after the Lunar New Year peak travel season and next March’s parliament session when the reshuffling of government officials is completed, before exiting the COVID-Zero strategy, the economists wrote.

Any easing of COVID-19 restrictions will probably be followed by a jump in infections, reduced mobility and possible supply chain disruptions, which will curb economic activity, the economists said.

“China is likely to experience a surge in infections upon a full reopening given the lack of infection-induced immunity and the high transmissibility of omicron,” they said.

“Therefore, we would expect a modest drag on growth in the first three months of reopening followed by a steep recovery thereafter.”

On the property market, Goldman said Beijing’s mantra of “housing is for living in, not for speculation” is unlikely to change if President Xi Jinping secures a third term, as is widely expected, at the Communist Party’s congress in October. Major easing of property restrictions is unlikely, the economists said.

“We continue to expect a sizable drag from the property sector to GDP growth this year and beyond,” Goldman said.

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