JP Morgan has upgraded its growth forecast for China next year, banking on an economic revival after it gets to grip with a surge in Covid cases following a relaxation of its ‘zero-Covid’ laws.
The US bank now expects China’s gross domestic product (GDP) to grow by 30 basis points to 4.3% next year.
“The most important development in the past month is earlier reopening with a faster pace. Our analysis has taken into account a transitional pain period before the economy enters a strong recovery,” JPM said.
However, fellow banking giant ING is less optimistic. The loosening of strict Covid-19 restrictions in China is unlikely to be the silver bullet the local economy needs, chief economist at ING, Iris Pang, said last week, after China announced the removal of its remaining coronavirus laws.
“Moving from isolation facility quarantine to home quarantine will not increase retail sales significantly,” she wrote.
“In short, economic growth in December and January will not be overly impressive, though we expect a quarter-on-quarter improvement in GDP from –0.4% year-on-year in the fourth quarter of this year to 3.4% YoY in the first quarter of 2023.”
However, Pang noted that the use of fewer Covid-19 tests will help trim down the fiscal deficit the government is facing.
China’s tough Covid-19 measures has ravaged its bustling industrials sector, stamping out activity in the world’s second largest economy.
- Reuters with additional editing by Sean O’Meara