Traffic police and epidemic prevention officers together check vehicles at a highway entrance in Zhengzhou, capital of Henan province, China, on the afternoon of January 8, 2022.
Costfoto | Future Publishing | beautiful pictures
BEIJING – Goldman Sachs cut its 2022 forecast for China’s economic growth on Tuesday due to expectations of increased restrictions on business activity aimed at containing the Covid omicron variant.
In the last few days, China has reported cases of omicrons in the city of Tianjin and Anyang, in Henan province, prompting at least a partial lockdown. Xi’an, a major city in central China, has been closed since the end of December to control an outbreak of Covid that authorities say has nothing to do with omicrons.
“Based on the latest Covid developments – in particular, the possible higher average level of restriction (and therefore economic cost) to contain the more infectious variant of Omicron – we are adjusting our projections down. forecast 2022 growth to 4.3%, from 4.8% previously,” Goldman Sachs analysts Hui Shan and a team wrote in a report late Tuesday.
Consumption is likely to be hit the most, while exports are less, say analysts, as they assume limited supply chain disruptions. They expect government policy easing to offset half of the drag from Covid restrictions and say the negative impact will be concentrated in the first quarter.
China’s economy shrank in the first quarter of 2020 as more than half of the country closed during the country’s first coronavirus outbreak. But the temporary closure coincides with the Lunar New Year holiday, when businesses can close for a month.
By the second quarter of 2020, the virus in the country was under control and the economy was growing again.
Almost two years later, local authorities are increasing travel restrictions and other measures despite the low number of cases – compared with the initial outbreak and the second wave, Goldman analysts say. a smaller outbreak in the summer of 2021, Goldman analysts said.
“Containing the Covid situation in the country remains a top priority for local officials,” the report said.
Maintaining stability is key, China’s top leaders emphasized at a annual economic planning meeting in December.
Many analysts expect China to maintain a zero-tolerance policy to control the pandemic until at least autumn. That is when the ruling Communist Party of China is about to hold a meeting scheduled to give the Chairman Xi Jinping an unprecedented third term.
Immediately, on the eve of the Beijing Winter Olympics opening on February 4, authorities are focused on ensuring the Lunar New Year does not contribute to further outbreaks of the disease. Goldman analysts indicate that the holiday travel season will last from January 17 to February 25.
Beijing failed to meet GDP target?
Chinese authorities are expected to release a growth forecast of at least 5% for 2022 during an annual meeting in March.
Analysts point out that this is above Goldman’s revised GDP forecast of 4.3%.
Streets in Tianjin, China, are empty on January 10, 2022, as the city begins to partially close after a spike in omicron cases.
Geno Hou | Future Publishing | beautiful pictures
To reconcile the potential gap between actual growth and the GDP target, the bank’s analysts said Beijing could deploy additional stimulus measures or remove the growth target – as is the case with 2020.
They also note previous instances in which weakness in some growth measures had caused the official GDP figure to fall short of the government’s target.
The accuracy of China’s official economic data is often questioned.
“Ultimately, we may, of course, be overestimating the growth impact of Omicron and Covid in general, given the public health system’s cumulative experience with the virus,” Goldman analysts said. virus and continuous improvements in border quarantine and domestic virus control regimes”.
