Economy
S&P cuts China GDP forecast as calls for stimulus intensify
S&P Global cut its forecast for economic growth in China this year, underscoring the uneven nature of the country’s post-reopening recovery that is spurring more calls for further stimulus.
S&P now expects China to log GDP growth of 5.2% in 2023, down from an earlier estimate of 5.5%. It was the first such cut by a global credit ratings agency this year and follows lowered predictions by Goldman Sachs and other major investment banks.
“China’s key downside growth risk is that its recovery loses more steam amid weak confidence among consumers and in the housing market,” S&P said in a statement on Sunday.
The world’s second-largest economy has slowed in recent months after coming back to life with the lifting of three years of restrictive zero-COVID policies. In May, property investment slumped further, industrial output and retail sales growth missed forecasts, and youth unemployment hit a record 20.8%.
Forecasts for China GDP growth this year range between 4.4% and 6.2%.
S&P said likely measures to bolster the economy could include “easing housing purchasing restrictions and mortgage down-payment requirements, expanding credit and infrastructure financing and, perhaps, fiscal support for consumption.”
Ning Jizhe, a senior economic official with the country’s top political advisory body and the former head of China’s statistics bureau, is among policy advisers calling for more supportive measures to be rolled out.
“It is better to introduce measures sooner than later,” he said at a forum in Beijing on Sunday, adding that the impact of the measures “ought not to be small”.
Last week, China cut its key lending benchmarks, the first such reductions in 10 months. A week earlier, the People’s Bank of China (PBOC) lowered short- and medium-term policy rates.
The world’s second-biggest economy will roll out more stimulus this year, sources involved in policy discussions have said.
Last week, three major state-run securities newspapers published front-page articles that cited economists as saying that the PBOC will likely further ease monetary policy.
And on Sunday, state-controlled Global Times painted a grim picture of the economy, reporting that many graduates are visiting temples to pray amid rising anxiety over finding a job.
Markets broadly expect stimulus policies to be unveiled after a regular meeting of the Communist Party’s political bureau in July.
“The government is allowing more calls from state media to prepare public opinion for that (politburo) meeting and raise expectations (for more stimulus),” said Nie Wen, a Shanghai-based economist at the investment firm Hwabao Trust.
Further highlighting pessimism over the economy, China and Hong Kong stocks slumped on Monday after disappointing domestic tourism figures for last week’s three-day Dragon Boat Festival, while the yuan also weakened against the dollar.
© 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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