China’s economy will grow 5% this year, Fitch Ratings has raised its forecast from 4.1% growth forecast made two months ago.
|According to Bank UBS, level consumption in China is still quite “cautious” in 2023. Photo: Reuters|
The above forecast was updated by Fitch Ratings (USA) on February 8, based on “evidence that consumption and activity economy is recovering faster than initially anticipated” after the Chinese government lifted most of the strict Covid-19 prevention and control restrictions by the end of 2022.
Further evidence from Fitch Ratings is that China’s latest Purchasing Managers’ Index (PMI) for the manufacturing and services sectors – a key measure of business activity – recorded an increase chief.
The official PMI for China’s manufacturing sector rose to 50.1 in January 2023, higher than the previous 47. Meanwhile, the service sector PMI reached 54.4 points, the highest level since June 2022. The PMI index above 50 points shows that the activity of the surveyed industry/sector has expanded compared to the previous survey cycle.
China has seen major Covid-19 outbreaks after the country’s authorities removed draconian epidemic prevention measures. However, the epidemic “seems to be settling down”, Fitch Ratings cited officials’ assessments medical China and data on people’s movement trends.
“The rapid recovery from the Covid shock means that economic activity in the first half of 2023 will bounce back more strongly than we anticipated,” said the Fitch Ratings group of economists, led by Brian Coulton.
“We believe stabilizing the recovery will remain the main focus in the near-term, but do not anticipate how drastic macroeconomic policy easing will be,” said Fitch Ratings economists.
Currently, analysts are paying much attention to the content discussed at the National People’s Congress of China scheduled to take place in March.
While many economists predict a consumption-led recovery in China’s economy, the Bank invest UBS (Switzerland) thinks that spending in China will be quite “cautious” because consumers are under pressure to spend.
UBS bank estimates that China’s total household savings range from 4,000 to 4.6 trillion yuan ($590 to $678 billion).
“While employment and household incomes still need to recover, consumer confidence may not fully recover but instead remains cautious,” UBS chief economist Ms. Wang Tao, comments.
“We believe that excess savings may not be fully and rapidly released in 2023,” said UBS Bank. As a result, the bank predicts China’s household consumption growth will reach 10-11 percent in nominal terms and 7.8 percent in real terms in 2023.
“Further normalizing consumer behavior and freeing up more excess savings could help underpin a consumption recovery in 2024 and beyond,” she said.