Chinese flags flutter in front of skyscrapers of multinational corporations on February 23, 2018 in Shanghai, China.
Vincent Isore | IP3 | beautiful pictures
China’s economy will grow 5% by 2023, Fitch Rating said in a revised forecast on Wednesday — an improved outlook from the previous 4.1 percent growth forecast given in December.
The latest revision is based on “evidence that consumption and activity are recovering faster than initially anticipated” after the Chinese government removed most of the strict Covid-19 restrictions. signal a move to give up Covid-zero policy.
Fitch also points out China’s latest move purchasing managers index (PMI) for manufacturing and services, a measure of business activity, showed further growth.
China’s official manufacturing PMI rose to 50.1 in January from 47 previously, and the country’s services PMI rose to 54.4, the highest since June 2022. above 50 indicates economic activity is expanding; a reading below 50 points for a contraction.
had big wave of Covid outbreak across China after the authorities lifted the measures. But Fitch pointed out that it “seems to be settling down,” citing comments from health officials and moving trends.
“The rapid recovery from the Covid conflict wave means activity in the first half of 2023 will be stronger than we anticipated,” said a team of economists led by Brian Coulton.
“We believe stabilizing the recovery will remain a key focus in the near-term, but do not anticipate strong macroeconomic policy easing,” the economists wrote, heading to the Congress of Deputies. National People’s Congress is scheduled to take place in March.
Economists also note China’s Gross Domestic Product in December better than Fitch expected.
prudent spending
While many economists expect a consumption-led recovery, UBS added that spending will be “conservative” as consumer confidence is strained.
The Bank of Switzerland estimates that Chinese households have total excess savings worth between 4 trillion yuan and 4.6 trillion yuan ($590 billion to $678 billion), according to the bank. China’s chief economist Wang Tao.
“With employment and household income still in need of recovery, consumer confidence may not fully recover but instead remains cautious,” Wang’s team said in a note.
“We think excess savings may not be fully and very quickly released by 2023,” UBS said.
Ultimately, UBS expects China’s household consumption growth to accelerate to 10-11% in nominal terms and 7.8% in real terms by 2023.
“Further normalizing consumer behavior and saving more of excess savings could help underpin a future consumption recovery in 2024 and beyond,” said Wang.
