Goldman joins Wall Street banks in cutting China growth outlook

Goldman Sachs has become the latest Wall Street bank to lower its growth forecast for China, as the world’s second-largest economy falters and loses momentum after reopening due to the COVID-19 pandemic.

The investment bank cut its full-year gross domestic product forecast for 2023 from 6% to 5.4%, noting that the economy will have plenty of uncertainty ahead. The recovery from strict Covid-19 lockdown measures continues to disappoint through soft economic dataas well as increased pressure on its real estate sector.

While the company sees further stimulus comingIt notes that the measures will not be enough to fix the larger problems it faces: weakened sentiment.

“With continued challenges from the real estate market, widespread pessimism among consumers and private entrepreneurs, and moderate policy easing to partially offset strong growth obstacles, we lower our 2023 real GDP forecast,” economists led by Chief China Economist Hui Shan said in Sunday research notes.

The latest revision from Goldman Sachs follows banks like UBS, Bank of America and JPMorgan, who have lowered their China full-year GDP estimates.

The Goldman Sachs economists added that there are numerous macroeconomic issues facing the nation.

“With the reopening push rapidly fading, mid-term challenges such as demographics, a multi-year property downturn, potential local government debt problems, and geopolitical tensions Value may start to become more important in China’s growth prospects,” they said.

It also sees further weakness in Chinese Yuan against U.S. dollar due to exchange rate difference with The People’s Bank of China is expected to ease monetary policy further while the Federal Reserve is hinting at more rate hikes to come.

UBS also sees the Chinese economy continue to weaken in the near term, with a particular focus on the second quarter of the year.

“Q2 [second quarter] Sequential growth could slow down to only 1-2% QoQ [seasonally adjusted annual rate]weaker than our previous expectation of 4.5%,” UBS Investment Bank chief China economist Wang Tao said in a Friday note.

Wang noted that uncertainty in China’s property sector remains a central risk to its forecast and could drive its growth outlook even lower.

“The risks to our forecast are slightly biased to the downside, mainly due to uncertainty in the property market and the path of upcoming property policy support, as well as the path to future property policy support,” she said. weaker external demand”.