Economists at Goldman Sachs lowered their forecasts for China’s economy this year as they counted the costs of the country’s disappointing recovery from pandemic-era restrictions.
Normally an engine of global growth, China had to keep Covid-19 lockdowns longer than most other countries and activity has failed to come roaring back to life since they were belatedly ended at the end of last year. It’s an extra drag for world growth, coming on top of faster inflation and higher interest rates.
The world’s second-biggest economy will expand 5.4% this year, not the 6% previously expected, Goldman economists led by Hui Shan wrote. It also trimmed the outlook for 2024.
The revision comes as U.S. Secretary of State Antony Blinken met with Chinese President Xi Jinping on Monday. In addition to a weakening property market and a deterioration of business confidence, China has been hurt by increasing tensions with the U.S., which have been trading tit-for-tat restrictions on microchip sales and exports in the name of national security.
China’s central bank has lowered two sets of borrowing costs in the past week to revive growth, and the government may soon unleash billions of dollars of infrastructure spending, The Wall Street Journal reported last week. That still may not be enough, Goldman said.
“The persistent growth headwinds are likely to win the upper hand in the tug of war between weakening growth momentum and increased policy easing,” the economists said. “The upcoming policy easing will not be as large and forceful as during the 2008-09, 2015-16 and 2020 cycles.”
Write to Brian Swint at [email protected]
Read the full article here
