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The World Bank sharply lowered China’s economic growth forecasts this year and next

Shanghai's Lujiazui financial district has been empty due to the outbreak of the epidemic. (19 December 2022)
Shanghai’s Lujiazui financial district has been empty due to the outbreak of the epidemic. (19 December 2022)

WASHINGTON — In a report published on Tuesday (December 20), the World Bank sharply cut its forecasts for China’s economic growth this year and next. The main factors dragging down China’s economy are the three-year coronavirus lockdown and the sluggish real estate sector, the report said.

According to the World Bank’s latest forecasts, China’s economic growth forecast this year is only 2.7%, well below the 4.3% forecast made by the World Bank in June. The World Bank’s forecast for China’s economic growth next year was cut to 4.3 percent from 8.1 percent.

The Chinese government’s full-year economic growth target set at the beginning of 2022 is 5.5%. But as lockdowns continue and economic conditions deteriorate, senior Chinese officials, have said the 5.5 percent economic growth target is no longer achievable. The World Bank’s forecast for China’s economic growth this year and next is well below its 5.5 percent target.

“China’s economic activity continues to tumble with the ups and downs of the pandemic, and slowing growth has led to uneven recovery,” the World Bank said in a report.

“Real GDP growth is expected to reach 2.7 percent this year and return to 4.3 percent in 2023 as the economy reopens,” the report said.

In the past three years, under the extreme epidemic prevention and control measures of “dynamic zeroing”, the Chinese government has suffered serious shocks and disruptions to people’s livelihood and the economy, which not only troubled investors but also caused public discontent. Under the dual pressure of popular protests and a sharp economic downturn, the authorities have begun to loosen extreme lockdown measures, but the remaining control measures and the surge of the epidemic due to the easing of lockdown measures continue to affect consumption and business activities to normal.

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Beijing residents line up to do nucleic acid. (2022 November 11)
Beijing residents line up to do nucleic acid. (2022 November 11)

In September, the World Bank lowered its economic growth forecast for China this year and next. At the time, China’s economy was forecast to grow 2.8 percent this year and 4.5 percent next year.

“China’s growth prospects are constrained by significant risks due to pandemic uncertainty, policy changes in response to the pandemic, and changes in household and business behavior,” the World Bank report said.

Mara Warwick, World Bank Country Director for China, Mongolia, and South Korea, said China’s “continued adaptation” to its anti-epidemic policies is critical to its economic recovery and public health.

“Accelerating efforts on public health preparedness, including scaling up vaccination, especially for high-risk groups, may lead to a safer and less disruptive reopening,” said Maya.

Beijing residents walk past mobile vaccination sites for the new coronavirus vaccine. (26 October 2022)
Beijing residents walk past mobile vaccination sites for the new coronavirus vaccine. (26 October 2022)

The World Bank noted that the Chinese economy also faces challenges with other risks unrelated to the pandemic, including uncertainty in global economic development, the impact of climate change, and “continued pressure” on the real estate market as Beijing cracks down on lending too loosely in the real estate sector.

China’s leaders said last week that they would accelerate policy adjustments to support the slowing economy and slow the impact of the coronavirus pandemic on businesses and consumers at a time when the global economic slowdown is affecting exports.

“With growth expectations remaining below real potential and the deterioration of the global environment, sustained macroeconomic support is needed,” said Elitza Mileva, World Bank Chief Economist for China.

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