The World Bank on Tuesday slashed its China growth forecast for the year as the pandemic and weaknesses in the property sector hit the world’s second largest economy.
In a statement, the institution slashed its forecast to 2.7 percent from 4.3 percent predicted in June.
It also revised its forecast for next year from 8.1 percent down to 4.3 percent.
Both figures are well below Beijing’s stated GDP growth target for this year of around 5.5 percent, a figure many analysts believe is now unattainable.
“Economic activity in China continues to track the ups and downs of the pandemic — outbreaks and growth slowdowns have been followed by uneven recoveries,” the World Bank said in a press release.
“Real GDP growth is projected to reach 2.7 percent this year, before recovering to 4.3 percent in 2023, amid a reopening of the economy.”
After three years of sudden lockdowns, mass testing, long quarantines and travel restrictions, China this month abruptly abandoned its zero-Covid policy.
But disruption to businesses has continued as cases surge and some restrictions remain in place.
“Continued adaptation of China’s Covid-19 policy will be crucial, both to mitigate public health risks and to minimise further economic disruption,” Mara Warwick, World Bank Country Director for China, Mongolia and Korea, said.
“Persistent stress” in the real estate sector — which accounts for about a quarter of annual GDP — could have wider macroeconomic and financial effects, the World Bank noted.
And it added that the risks from extreme weather caused by climate change and the wider global slowdown also threatened growth.
The slowdown in China comes as the global economy is battered by surging interest rates aimed at fighting runaway inflation that has been triggered by Russia’s war in Ukraine as well as global supply chain snarls.
Beijing has sought to mitigate low growth with a series of easing measures to provide support, slashing key interest rates and pumping cash into the banking system.
“Directing fiscal resources towards social spending and green investment would not only support short-term demand but also contribute to more inclusive and sustainable growth in the medium term,” said the World Bank’s Lead Economist for China Elitza Mileva.