China’s GDP growth seen recovering to 8.4% in 2021, slowing to 5.5% in 2022
Bouncing back from a pandemic stricken 2020 with official interest rates likely to be held steady, China’s economy is expected to grow 8.4% in 2021, before slowing to 5.5% in 2022, the median forecasts of 72 economists polled by Reuters showed.
While the predicted growth for 2021 would be the best reading in a decade, it is rendered less impressive coming off the low base set last year.
Growth for 2020 is expected to be 2.1%, making China the only major economy to grow, albeit at its slowest annual pace since 1976.
The economy has been recovering steadily from a steep 6.8% slump in the first quarter, when an outbreak of COVID-19 in the central city of Wuhan, first detected in late 2019, turned into a full blown epidemic.
“We expect China’s GDP growth to rebound to 8.2% in 2021, led by exports and domestic consumption,” analysts at UBS said in a note.
“Property activities and infrastructure investment are expected to weaken on fading policy support, while manufacturing capex should rebound on better earnings.”
Some analysts cautioned that a rebound in COVID cases in China could impact pent-up consumption demand in next month’s e Lunar New Year period.
Economic growth is expected to slow to 5.5% in 2020, according to the poll. That reflects China’s long-term slowing economic trajectory due to structural and demographic changes.
The median forecasts on 2020 and 2021 growth remained unchanged from the previous Reuters poll in October.
NO POLICY TIGHTENING ON CARDS
Chinese leaders at a key agenda-setting meeting last month pledged to maintain “necessary” policy support for the economy this year, avoiding a sudden policy shift, pointing to smaller economic stimulus in 2021.
This year marks the start of China’s 14th five-year plan, which policymakers see as vital for steering the world’s second-largest economy past a so-called “middle income trap”.
China’s central bank governor, Yi Gang, said last week it would prioritise stable monetary policy in 2021, and any steps to exit stimulus measures would have little impact on the economy, Xinhua news agency reported.
The PBOC will scale back support for the economy in 2021 and cool credit growth, but fears of derailing growth recovery and debt defaults are likely to prevent it from tightening anytime soon, policy sources said.
The central bank has rolled out a raft of measures including cuts in interest rates and reserve ratios since February to support the virus-hit economy. But it has shifted to a steadier stance in recent months and kept its benchmark lending rate, the loan prime rate, unchanged since May.
Analysts expect China will keep its one-year loan prime rate (LPR) steady at 3.85% until the end of 2021. The LPR has remained unchanged since May.
The poll also predicted no change to the benchmark deposit rate until the end of 2021. The PBOC has kept it steady at 1.5% since October 2015.
China’s consumer inflation will likely to slow to 1.6% in 2021 from 2.5% in 2020, but it could pick up to 2.3% in 2022, according to the poll.
Source: Reuters (Polling by Vivek Mishra and Manzer Hussain in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Simon Cameron-Moore)