THE OECD HAS cut its forecast for China’s GDP growth this year by 1.2 percentage points to 3.2%, citing repeated lockdowns under the zero-Covid policy and the crisis in the property market.
Its latest interim Economic Outlook, updating its June numbers, paints a grim picture of the worldwide shock stemming from Russia’s attack on Ukraine. The ensuing energy crunch and surge in food prices have inflicted a widespread cost-of-living crisis. The OECD is holding its global growth forecast unchanged at 3.0% but sees growth slowing next year by 0.6 of a percentage point to 2.2% as inflation becomes entrenched.
In contrast, the OECD sees a recovery in China next year to 4.7% growth on the back of policy stimulus and a rebound from this year’s Covid lockdowns. It does not see much, if any, further monetary easing, but it expects stimulus measures worth up to 2% of GDP to strengthen infrastructure investment. However, even 4.7% growth would still be 0.2 of a percentage point lower than the OECD’s previous forecast.
It also expects China’s headline inflation next year to be around 3%, a higher level than in the recent past. China has had relatively low and stable inflation by world standards, despite the upward pressures from food and energy.
The OECD’s recovery growth forecast for 2023 turns on Beijing dealing with the continuing real estate downturn amidst elevated corporate debt levels. It also warns that risks remain of sustained weaker private domestic demand, a veiled reference to the continuance of strict zero-Covid protocols.
As a measure of how the world has been changed by Russia’s invasion of Ukraine, it is worth remembering that a year ago, the OECD was expecting China’s economy to grow by 5.8% this year.