The COVID-19 zero policy program was abruptly stopped at the end of last year, and this week’s critical economic data from China are likely to reveal a dramatic slowdown in growth. However, the focus is swiftly shifting to a big recovery in 2023.
The economy suffered from a spike in illnesses in December, and official numbers due out on Tuesday are likely to reveal that activity has fallen to levels similar to those experienced when Shanghai was shut down in the spring of last year.
China Economy
The median estimate in a Bloomberg survey of economists, gross domestic product growth in the fourth quarter of 2022 fell to 1.6%, which is less than half the rate seen in the third quarter.
According to the study, the full-year GDP probably increased about 2.7% last year, which is far less than the government’s lofty target of approximately 5.5% and just a little bit more than the 2.2% growth recorded in 2020, the year the pandemic first appeared.
In December, major Chinese cities had a substantial decline in mobility due to an increase in COVID-19 cases, according to high-frequency statistics.
Private surveys revealed a sharp decline in consumer mood after it already reached record lows in earlier months. Increasing unemployment and slower income growth in 2022 have made households cautious with their expenditures.
COVID-19 Cases
In 2022, COVID-19 control efforts caused significant economic damage in China, including complete lockdowns in cities like Shanghai and limits on citizens’ ability to travel and factories’ ability to move their products when infections soared.
Activity fell down a cliff at the end of last year when the Covid zero policy was abruptly abandoned as workers feel unwell and customers stayed home out of fear of getting sick.
In large cities like Beijing and Guangzhou, there are indications that infection waves have peaked and that recent weeks have seen a comeback in activity.
Although some large banks, including Morgan Stanley, Bank of America, and Citigroup Inc., anticipate growth to be closer to 5.5% or higher, the median prediction in a Bloomberg survey of experts is for GDP growth to rise to 4.8% in 2023.
In an effort to prevent over-stimulating an economy moving towards routine operations, the People’s Bank of China held the rate constant on Monday and supplied less money than anticipated to the banking system through policy loans.
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