By Kevin Yao
BEIJING (Reuters) – China’s economic growth is likely to slow to 4.6% in 2024, and cool further to 4.5% in 2025, a Reuters poll showed, raising the heat on policymakers to roll out more stimulus measures amid deflationary pressures and a severe property slump.
Gross domestic product (GDP) likely grew 5.2% in 2023 – meeting the government’s annual growth target, partly helped by the previous year’s low-base effect which was marked by COVID-19 lockdowns, according to the median forecasts of 58 economists polled by Reuters.
But the world’s second-largest economy has struggled to mount a strong and sustainable post-COVID pandemic bounce, burdened by the protracted property crisis, weak consumer and business confidence, mounting local government debts, and weak global growth.
Recent data suggested the economy was starting 2024 on shaky footing, with persistent deflationary pressures and a slight pick-up in exports unlikely to kindle a quick turnaround in weak domestic activity. December bank lending was also weak.
“China’s economic outlook for 2024 will be shaped by the prospects of the real estate sector,” analysts at Swiss Life Asset Management said in a research note.
“The government’s aim is to reduce the oversupply that has built up in the sector in recent years, and to bring supply into line with actual demand. We therefore expect the slowdown to continue over 2024 and beyond.”
GDP in the fourth quarter of 2023 likely grew 5.3% from a year earlier, quickening from the third-quarter’s 4.9% pace, the poll showed.
But on a quarterly basis, the economy is forecast to grow 1.0% in the fourth quarter, compared with growth of 1.3% in July-September, the poll showed.
The government is due to release 2023 and Q4 GDP data, along with December activity data, on Wednesday. (0200 GMT).
“The fragile recovery could remain on track in December though it could be a soft patch,” analysts at Citi said in a note. “Policy delivery could be key to watch in the next few months.”
Beijing set a growth target of around 5% in 2023 and policy insiders expect it to maintain such a target this year.
MORE STIMULUS ON THE CARDS
The People’s Bank of China (PBOC) has pledged to step up policy support for the economy this year and promote a rebound in prices.
But the PBOC faces a dilemma as more credit is flowing to productive forces than into consumption, which could add to deflationary pressures and reduce the effectiveness of its monetary policy tools
On Monday, the PBOC left the medium-term policy rate unchanged, defying market expectations for a cut as pressure on the yuan currency continued to limit the scope of monetary easing.
Analysts polled by Reuters expected the central bank to cut the one-year loan prime rate (LPR) — the benchmark lending rate — by 10 basis points (bps) in the first quarter.
The PBOC may also cut banks’ reserve requirement ratios (RRR) in March-April, if economic indicators continue to weaken, Wen Bin, chief economist at Minsheng Bank, said in a note.
The government, which in October unveiled 1 trillion yuan in sovereign bonds to fund investment projects, is likely to press ahead with more fiscal spending to drive growth, analysts said.
Consumer inflation will likely pick up to 1.0% in 2024 from 0.2% in 2023, and rise further to 1.6% in 2025, the poll showed.
(For other stories from the Reuters global economic poll:)
(Polling by Milounee Purohit and Anant Chandak; Reporting by Kevin Yao; Editing by Kim Coghill)
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