Goldman Sachs downgraded China’s GDP forecast in 2022 to 3%

Analysts at the American bank Goldman Sachs have downgraded their forecast for the Chinese economy growth in 2022 from 3.3% to 3% due to the increase in the number of coronavirus infections and the release of weak economic statistics. This is reported by the Interfax-Ukraine agency with the reference to Bloomberg.

The analysts’ consensus forecast, polled by Bloomberg, predicts China’s economy to grow by 3.8%, while experts at Nomura Holdings Inc. lowered China’s GDP growth forecast from 3.3% to 2.8%. The Chinese government, in turn, set a target indicator of economic growth at the level of 5.5%.

“China’s economic growth in the second half of the year is likely to come under severe pressure due to the zero-tolerance policy on the coronavirus and “deterioration in the real estate sector and the situation with local government budgets, as well as an expected slowdown in export growth,” according to the group of Nomura’s economists.

In order to achieve economic growth of 5.5%, the Chinese authorities are ready to introduce new models of economic support.

“The Chinese authorities are also concerned about the state of the country’s economy and have begun to take measures to stimulate growth. Thus, the People’s Bank of China on Monday poured 400 billion yuan (almost $60 billion) into the financial system as part of the medium-term lending program (MLF), and also lowered the rate on one-year loans issued under the MLF by 10 basis points to 2.5% per annum,” the publication informs.

On Thursday, the Chinese publication China Securities Journal wrote that local authorities may use part of the unused quota to issue bonds with a total amount of about 1.55 trillion yuan ($229 billion). Shanghai Securities News with the reference to a senior economist at Yuekai Securities Co. Luo Zhiheng wrote that they can also preventively use part of the quota next year.

As GMK Center reported earlier, in July, China’s Purchasing Managers’ Index (PMI) fell even further to 33 points, down 3.2 percentage points (pp) from June. It is the lowest value since November 2018, when this index was firstly calculated. In June the PMI in China’s steel industry fell by 4.6 pp compared with the previous month, to 36.2 points.

Also, Chinese plants reduced the production of steel by 6.5% compared to the same period in 2021, to 526.9 thousand tons The output of pig iron during this period decreased by 4.7%, to 438.93 million tons. The production of finished steel in China reached 667.14 million tons, decreasing by 4.6% to January-June 2021.