The World Bank slashed its economic growth outlook for the world’s second-largest economy, China, by almost a point and a half in its latest forecast published on Tuesday. This comes after the country’s nearly three years of stringent ‘zero-Covid’ restrictions and its abrupt ease, earlier this month, following countrywide protests.
“Economic activity in China continues to track the ups and downs of the pandemic – outbreaks and growth slowdowns have been followed by uneven recoveries,” said the World Bank in a statement. Therefore, the Real GDP growth is estimated to reach 2.7 per cent in 2022 before recovering to 4.3 per cent in the upcoming year, as the economy will open, it added.
Notably, the estimate for 2023 has also been reduced from 8.1 per cent to 4.3 per cent which was given earlier this year in June. This also could be attributed to some restrictions in place while the recent uptick in cases has disrupted business.
The US-based institute also noted factors like uncertain global outlook, climate change as well as the “persistent stress” in the country’s real estate market amid Beijing’s crackdown on excessive lending as some of the non-pandemic related risks.
However, Mara Warwick, World Bank country director for China, Mongolia and Korea said that China’s “continued adaptation” of its COVID-19 policies will play a significant role in the country’s ability to mitigate public health risks and to minimise further economic disruption, reported AFP.
In the larger context, the slowdown has also been seen as a consequence of the global economy being battered by high-interest rates with recent hikes announced by major economies including the US and UK, and potentially by the European Union in a bid to curb the soaring inflation triggered by the Russian invasion of Ukraine and pandemic related supply chain issues.
According to World Bank’s Lead Economist for China, Elitza Mileva, Beijing could benefit from directing fiscal resources towards social spending and green investment, which could support short-term demand as well as contribute to sustainable growth in the medium term.
Meanwhile, China has also sought to mitigate this low growth by providing more support through a series of ease in restrictions as well as slashing interest rates in key areas of the economy, and pumping cash into the country’s banking system.
(With inputs from agencies)
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