Economy
Goldman Sachs cuts China GDP forecast for 2023
Goldman Sachs slashed its economic growth forecasts for China on Sunday, stating that current levels of stimulus from the government will provide less support for the economy than previously thought.
The investment bank cut its forecast for 2023 gross domestic product (GDP) to 5.4% from 6%, joining a growing list of major banks that have cut their bets on a Chinese economic recovery this year.
The bank said in a note released on Sunday that the country’s ongoing stimulus was incapable of generating a strong “growth impulse,” and would result in a slower recovery despite the lifting of anti-COVID measures earlier this year.
Goldman Sachs also slashed its outlook for second-quarter GDP to quarter-on-quarter growth of 1% from 4.9%, but forecast an improvement in the second half of the year on potentially more stimulus measures.
The move follows similar annual GDP target cuts from several major banks including UBS Group AG, Nomura Holdings Inc, Bank of America, and JPMorgan last week, who also cited a slower-than-expected recovery from the COVID-19 pandemic and an insufficient degree of stimulus measures from Beijing.
But Goldman Sachs and other brokerages still hold a 2023 GDP target that is higher than the 5% forecast by the Chinese government, which was viewed as modest.
The Chinese economy grew 3% in 2022, one of its worst GDP prints on record. Growth had then rebounded in the first quarter of 2023, surging to 4.5% as the country scaled back three years of strict COVID-related restrictions.
But this rebound now appears to be running out of steam, as shown by a string of weaker-than-expected economic readings over the past two months.
China’s manufacturing sector – a major economic driver – is grappling with worsening local and international demand, while the property market has failed to rebound from a three-year downturn.
This spurred a series of interest rate cuts by the People’s Bank of China over the past week, with a cut in its benchmark loan prime rate now expected on Tuesday.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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