By Kevin Yao
BEIJING (Reuters) – China’s economy is expected to have slowed in the third quarter as demand at home and abroad faltered, but increased support from the government means Beijing may still be able to achieve its full-year growth target.
Gross domestic product (GDP) likely grew 4.4% in July-September from a year earlier, slowing from the 6.3% pace in the second quarter, according to the median forecast of 60 economists polled by Reuters.
The world’s second-largest economy began to falter in the second-quarter after a brief post-COVID recovery, dragged by a property downturn and huge debt due to decades of infrastructure outlays.
However, recent economic data has shown some signs of stabilising after a flurry of modest policy measures, but economists believe more support is needed to keep growth on track.
Data released on Friday showed exports and imports continuing to decline, although at a slower pace. And while bank lending jumped, persistent deflationary pressures underlined the challenges policymakers face in trying to revive activity.
“We remain subscribed to our cyclical bottom call and see a synchronised upbeat of the economy and policies possible ahead of us,” analysts at Citi said in a note, following Friday’s data.
“How the latest easing plays out and whether we’ll have additional policy easing within the year remain the most important questions for China macro.”
On a quarterly basis, GDP is forecast to grow 1.0% in the third quarter, versus growth of 0.8% in April-June, the poll showed.
The Oct. 9-16 Reuters poll predicted the economy would grow 5.0% this year, in line with a September survey and Beijing’s own target but lower than 5.5% forecast in a July poll. Growth was forecast to slow to 4.5% in 2024.
Analysts have repeatedly cut their growth outlook this year.
The economy grew just 3% last year due to COVID curbs, badly missing the official target.
Analysts polled by Reuters expect the central bank to keep banks’ reserve requirement ratio (RRR) and benchmark lending rates steady towards the year-end.
Beijing may step up fiscal stimulus to get activity on a more solid footing, though the impact may not be felt until well into 2024, analysts said.
China is considering issuing at least 1 trillion yuan ($136.82 billion) in additional sovereign bonds to fund infrastructure projects, Bloomberg News reported last week, citing people familiar with the matter.
The central bank is constrained in how much it can ease monetary policy for fears of hurting the yuan, analysts said
In September, the central bank cut the RRR – the amount of cash that banks must hold as reserves – for the second time this year to boost liquidity and support the economic recovery.
Other policy support included interest rate cuts, property easing and efforts to shore up the private sector.
In August, the central bank cut its benchmark lending rate, or the loan prime rate (LPR), by 10 basis points to 3.45%.
Consumer inflation is expected to slow to 0.5% in 2023 from 2.0% in 2022 – well below the official target of around 3%, the poll showed. The inflation is expected to edge up to 1.8% in 2024.
(For other stories from the Reuters global long-term economic outlook polls package:)
($1 = 7.3088 Chinese yuan)
(Polling by Susobhan Sarkar and Anant Chandak in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Sam Holmes.)
