Major banks cut China 2023 GDP forecasts as recovery falters

Photo by Lin Zhizhao on Unsplash
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Several major banks have cut their 2023 gross domestic product (GDP) growth forecasts for China after May data showed a post-COVID recovery was faltering in the world’s second-largest economy.

Nomura has cut its forecast for China’s 2023 GDP growth to 5.1% from 5.5%, the Japanese bank said in a note on Friday, following similar moves by UBS, Standard Chartered, Bank of America (BoA) and JPMorgan.

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The banks now expect China’s GDP growth to be between 5.1% and 5.7% this year, down from an earlier range of 5.5% to 6.3%.

The government has set a modest GDP growth target of around 5% for this year after badly missing its 2022 goal.

UBS economists on Friday cut their GDP forecast to 5.2% from 5.7% and said in a note that they expected more policy support to come.

China’s central bank on Thursday cut the interest rate on its one-year medium-term lending facility, the first such easing in 10 months, paving the way for cuts in the benchmark loan prime rates (LPR) next week.

Economists at Standard Chartered lowered their 2023 growth forecast to 5.4% from 5.8% previously.

“Additional stimulus likely to be measured, as China prioritises improving business climate and confidence,” the economists said in a note.

Standard Chartered lowered its forecast for China’s second-quarter growth to 5.8% from 7%. The April-June growth is widely expected to be boosted by a low base of comparison given there were widespread COVID-19 lockdowns a year earlier.

BofA downgraded its 2023 GDP growth forecast to 5.7% from 6.3%, while JPMorgan had earlier trimmed its outlook to 5.5% from 5.9%.

China will roll out more stimulus to support a slowing economy this year, but authorities are likely to focus on shoring up weak demand in the consumer and private sectors, sources involved in policy discussions said.

Nomura has also cut its forecast for China’s 2024 growth to 3.9% from 4.2%, while BofA cut its outlook to 5.0% from 5.2%.