China: The world Bank has sharply slashed its annual growth forecast for China, warning in a report on Wednesday that covid The disruption could further slow recovery in the world’s second-largest economy.
China is the last major economy to stick to a zero-Covid policy, which has used rapid lockdowns, mass testing and strict movement restrictions to quell the outbreak – but it has upended supply chains and reduced economic indicators. It has pulled down to its lowest level in nearly two years.
Growth in China is projected to slow to 4.3 percent in 2022, the World Bank said in a report on Wednesday, marking a 0.8 percentage-point drop from its December forecast.
This “largely reflects the economic damage caused by the Omicron outbreak and the prolonged shutdown in parts of China from March to May,” the report said, the highly transmissible version of the coronavirus. is mentioned.
In those months, restrictions on dozens of cities, including the manufacturing centers of Shenzhen and Shanghai, as well as the breadbasket province of Jilin, affected business operations and kept consumers at home.
“In the short term, China faces the dual challenge of balancing COVID-19 mitigation with supporting economic growth,” said Martin Raiser, director of the World Bank for China, Mongolia and Korea.
“The dilemma … is how to make the policy stimulus effective, as long as mobility restrictions remain in place.”
The World Bank said a resumption of activity is expected in late 2022, helped by financial incentives and further easing of housing regulations.
But domestic demand is likely to recover gradually and will only partially offset the damage related to the earlier pandemic.
– The ‘Old Playbook’ – The World Bank’s forecast adjustment comes amid growing concerns that China may not meet its official growth target of around 5.5 per cent this year.
Premier Li Keqiang has warned that today’s challenges are in some ways “more than those hit by the pandemic” in 2020, and that the government has rolled out a series of measures to try and kick-start the economy.
The Chinese government has also made a major infrastructure push this year, but the World Bank warned it was a precarious path.
“There is a danger that China is bound by the old playbook of promoting growth through debt-financed infrastructure and real estate investment,” it said on Wednesday.
“Such a growth model is ultimately unsustainable and the indebtedness of many corporates and local governments is already very high.”
The latest forecast also assumed that China’s zero-Covid policy would be “maintained in the short term to avoid stressing its health care system”, meaning the potential for recurrent disruptions.
The World Bank also lowered its global growth forecast to 2.9 percent, warning that the world economy risks falling into a damaging period of 1970s-style “stagflation” in the wake of the Russian invasion of Ukraine.
China is the last major economy to stick to a zero-Covid policy, which has used rapid lockdowns, mass testing and strict movement restrictions to quell the outbreak – but it has upended supply chains and reduced economic indicators. It has pulled down to its lowest level in nearly two years.
Growth in China is projected to slow to 4.3 percent in 2022, the World Bank said in a report on Wednesday, marking a 0.8 percentage-point drop from its December forecast.
This “largely reflects the economic damage caused by the Omicron outbreak and the prolonged shutdown in parts of China from March to May,” the report said, the highly transmissible version of the coronavirus. is mentioned.
In those months, restrictions on dozens of cities, including the manufacturing centers of Shenzhen and Shanghai, as well as the breadbasket province of Jilin, affected business operations and kept consumers at home.
“In the short term, China faces the dual challenge of balancing COVID-19 mitigation with supporting economic growth,” said Martin Raiser, director of the World Bank for China, Mongolia and Korea.
“The dilemma … is how to make the policy stimulus effective, as long as mobility restrictions remain in place.”
The World Bank said a resumption of activity is expected in late 2022, helped by financial incentives and further easing of housing regulations.
But domestic demand is likely to recover gradually and will only partially offset the damage related to the earlier pandemic.
– The ‘Old Playbook’ – The World Bank’s forecast adjustment comes amid growing concerns that China may not meet its official growth target of around 5.5 per cent this year.
Premier Li Keqiang has warned that today’s challenges are in some ways “more than those hit by the pandemic” in 2020, and that the government has rolled out a series of measures to try and kick-start the economy.
The Chinese government has also made a major infrastructure push this year, but the World Bank warned it was a precarious path.
“There is a danger that China is bound by the old playbook of promoting growth through debt-financed infrastructure and real estate investment,” it said on Wednesday.
“Such a growth model is ultimately unsustainable and the indebtedness of many corporates and local governments is already very high.”
The latest forecast also assumed that China’s zero-Covid policy would be “maintained in the short term to avoid stressing its health care system”, meaning the potential for recurrent disruptions.
The World Bank also lowered its global growth forecast to 2.9 percent, warning that the world economy risks falling into a damaging period of 1970s-style “stagflation” in the wake of the Russian invasion of Ukraine.