Citi raises its Chinese GDP forecast, bringing it closer to the official target

Citi raises its Chinese GDP forecast, bringing it closer to the official target

April 4, 2022: -China’s economy faces so much new pressure from Covid that Beijing may increase stimulus boosting overall growth, Citi said Thursday.

“Given the strong start of the year and the anticipated government support, we revise our growth forecast from 4.7% to 5.0% for 2022,” Xiangrong Yu, chief China economist at Citi, said.

The new forecast is closer to the official gross domestic product target of around 5.5%, announced in early March. China reported better-than-expected growth in retail sales, fixed-asset investment, and industrial production for January and February.

The upgrade to Citi’s GDP forecast comes on the back of expectations of investment in projects like infrastructure and affordable housing, according to the report.

The official Purchasing Managers’ Indexes, which measure market conditions for manufacturing and services businesses, fell into contraction territory in March. That’s the first time both indexes have done so since February 2020.

“The current Omicron wave is the worst outbreak since Wuhan, but its impact on PMI appears lighter than implied by the outbreak’s severity,” Yu said Thursday. “The data shows that the impact of the containment measures is substantial on-demand and services but milder on production and construction.”

“China adapts to minimize the economic costs while implementing the ‘dynamic zero-Covid’ policy,” he said.

In March, China is facing its worst wave of Covid-19 since the initial shock of the pandemic in 2020. Major cities like Shanghai and Shenzhen have imposed lockdowns and quarantines to control the highly infectious omicron variant outbreaks.

On Friday, according to data released, the Caixin manufacturing PMI, a third-party study covering smaller businesses than the official survey, also fell into contraction territory in March and its lowest since February 2020.

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Citi raises its Chinese GDP forecast, bringing it closer to the official target