By Kevin Yao
BEIJING – China’s economic growth likely slowed sharply in the second quarter as COVID-19 lockdowns hit factories and consumer spending, a Reuters poll showed, suggesting policymakers may have to do more to spur a faster recovery.
Gross domestic product (GDP) likely grew 1.0% in the April-June quarter from a year earlier, according to the median forecast of nearly 50 economists polled by Reuters.
The expected growth would be the weakest since a steep 6.9% slump in the first quarter of 2020, when an outbreak of COVID-19 in the central city of Wuhan, first detected in late 2019, turned into a full blown epidemic.
On a quarterly basis, GDP is forecast to drop 1.5% in the second quarter, versus growth of 1.3% in January-March, the poll showed.
“The second-quarter GDP took another hit from COVID after 2020, although the downturn may not be as sharp as before,” said Nie Wen, a Shanghai-based economist at Hwabao Trust.
“Going forward, the pace of recovery will not be as strong as in 2020 due to the lingering impact from COVID curbs, and exports and the property sector could be affected by external and internal factors.”
Chinese exporters face headwinds from a potentially sharp global economic downturn as major central banks tighten policy to fight soaring inflation.
Growth is expected to pick up to 4.8% in the third quarter and 5.1% in the fourth quarter, bringing the full-year expansion to 4.0%, versus 5.0% in a Reuters poll conducted in April.
The government is due to release second-quarter GDP data, along with June activity data, on July 15 at 0200 GMT.
Economic growth is forecast to pick up to 5.3% in 2023.
The economy has started a tepid recovery from the supply shocks caused by wide lockdowns, although headwinds to growth persist, including from a still subdued property market, soft consumption and fear of any recurring waves of infections.
Full or partial lockdowns were imposed in major Chinese cities from March through May, including the financial and commerce hub of Shanghai, jolting supply chains and economic activity.
China has been ramping up policy support for the economy, although analysts say the official growth target of around 5.5% for this year will be hard to achieve without doing away with its strict zero-COVID strategy.
MORE SUPPORT EXPECTED
The government has rolled out a raft of policies in recent weeks, cutting taxes for businesses and channelling more money into big-ticket infrastructure projects.
The central bank has pledged to step up support for the slowing economy, but some analysts believe the room to ease policy could be limited by worries about capital outflows, as the U.S. Federal Reserve raises interest rates.
“We expect more policy stimulus to come, with further credit growth rebound, modest easing of LGFV (local government financing vehicle) financing, and more property policy easing,” analysts at UBS said in a note.
“However, policies announced so far have been modest, and lingering (albeit easier) COVID restrictions will likely limit the efficacy of macro policy support.”
Analysts expect the central bank to trim the one-year Loan Prime Rate, the benchmark lending rate, by 10 basis points in the third quarter, the poll showed.
The PBOC is likely to keep banks’ reserve requirement ratio (RRR) – the amount of cash that banks must hold as reserves – steady in the rest of 2022, according to the poll.
Consumer inflation is expected to quicken to 2.3% in 2022, up from 2.2% in April’s forecast but still below the official target of around 3%, before steadying at 2.3% in 2023, the poll showed.
(For other stories from the Reuters global long-term economic outlook polls package:)
(Polling by Anant Chandak, Swathi Nair in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Jacqueline Wong)
