Fitch raises China’s growth forecast to 5% for 2023

Rating agency Fitch has revised its forecast for China’s economic growth in 2023 to 5.0 per cent from 4.1 per cent previously as consumption and broader activity are recovering faster than initially anticipated after the end of the “zero-COVID” regime.

Fitch said the recovery will be primarily led by consumption, noting that many high-frequency indicators have recently rebounded though still remain below pre-pandemic norms.

Despite the forecast upgrade, the rating agency expected the economic rebound this year to be less vigorous than that in 2021, when the economy posted GDP growth of 8.4 per cent.

Fitch was the first major rating agency to upgrade China’s 2023 economic growth forecast. S&P Global expected the economy to remain on track for 4.8 per cent GDP growth in 2023, in line with its November baseline while Moody’s has retained its November forecast of 4.0 per cent expansion.

“This reflects in part ongoing weakness in the property market, which showed little evidence of an improvement in sales or housing starts in late 2022, despite a build-up of incremental policy support,” Fitch said in a statement.

In addition, net trade may become a drag on economic growth in 2023, Fitch added, with export demand being depressed by economic slowdowns in the United States and Europe.

The direction of fiscal policy would remain uncertain ahead of a parliament meeting in March, Fitch said.

Premier Li Keqiang pledged last week that the government will work to consolidate and expand the economic recovery momentum despite facing difficulties and challenges.

Fitch does not expect aggressive macro-policy easing, and is forecasting a budget deficit of around 7 per cent of GDP in 2023, down from an estimated 8 per cent in 2022.

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Policymakers plan to step up support for domestic demand this year but are likely to stop short of splashing out big on direct consumer subsidies, keeping their focus mainly on investment, Reuters previously reported.

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