Continued Downgrade of China's Growth Forecast... 2Q Contraction and Annual 2% Projection

SC lowers from 5% to 4.1%... '5.5%' moves further away
Citigroup, Goldman Sachs, and others also cut rates one after another

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] As China's economic indicators for April deteriorated significantly, global credit rating agencies have successively downgraded their forecasts for China's economic growth rate. There is even speculation about negative growth in the second quarter, causing the annual growth rate forecast to plummet to 2%.

According to Bloomberg News on the 19th (local time), Bloomberg Economics sharply lowered China's growth rate for this year from the previous 3.6% to 2%. The second-quarter growth rate is expected to be a contraction of 1.5% to 2.7%. Bloomberg predicted that the Chinese government and the People's Bank of China will strengthen support but stated, "The possibility of easing the zero-COVID policy is slim, making it difficult to reach even 5%, let alone 5.5% growth."

Standard Chartered (SC) said that China's zero-COVID policy caused significant disruptions in production and consumption in April and early May, lowering the annual growth forecast from 5% to 4.1%. The second-quarter forecast was reduced from 3.5% to 0.3%.

SC added, "If China's COVID-19 situation improves and continuous policy support is provided, recovery is expected in the second half of the year," but also predicted, "For every additional month of severe lockdown, the annual economic growth rate will fall by 0.6 percentage points."

[Image source=Yonhap News]

Goldman Sachs lowered its growth forecast from 4.5% to 4% on the 18th, citing the strengthening of China's quarantine policies. Citi adjusted its forecast down from 5.1% to 4.2% on the 17th.

Due to the government's maintenance of the zero-COVID policy, retail sales (-11.1%) and industrial production (-2.9%) last month plunged to their worst levels since the pandemic began. The urban unemployment rate rose to 6.1%, and youth (ages 16-24) unemployment reached a record high of 18.2%.

China emphasizes that the zero-COVID policy has caused economic damage and stresses the need to return to a normal track as soon as possible. According to local media such as state-run CCTV and Xinhua News Agency, Premier Li Keqiang said at an economic work symposium held in Yunnan Province, "We must strengthen macro policy adjustments, and government agencies should implement policies as soon as possible," adding, "Efforts must be made to get the economy back on track as quickly as possible."