Goldman cuts China GDP for 2022 amid lockdowns, omicron
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On the afternoon of January 8th, 2022, traffic police and epidemi prevention officers worked together to inspect vehicles at an entrance to Zhengzhou (the capital of Henan Province, China).
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BEIJING — Goldman Sachs cut its 2022 forecast for China economic growth Tuesday in expectation of increased restrictions on business activity aimed at containing the omicron Covid variant.
China reported recent pockets of Omicron cases within Tianjin and Anyang in Henan province. This has prompted some partial lockdowns. Xi’an, a major city in central China, has been locked down since late DecemberTo control an outbreak of Covid that officials say isn’t linked to the omicron.
“In light of the latest Covid developments — in particular, the likely higher average level of restriction (and thus economic cost) to contain the more infectious Omicron variant — we are revising down our 2022 growth forecast to 4.3%, from 4.8% previously,” Goldman Sachs analysts Hui Shan and a team wrote in a report late Tuesday.
The analysts believe that exports will be most affected, and consumption the worst, because of the limited disruptions in supply chain logistics. Analysts expect that half of the Covid restriction drag will be neutralized by government policy, while the majority of negative effects are expected to occur in the first quarter.
China’s economy contracted in the first quarter of 2020More than half of the country lost their services during the first coronavirus attack in the country. The temporary closures were combined with Lunar New Year, which allows businesses to be shut down for up one month.
In the second quarter, 2020 saw the virus under control and domestically the economy began to grow again.
Nearly two years later, local authorities are increasing travel restrictions and other measures despite a low number of cases — relative to the initial outbreak and a smaller one in the summer of 2021, the Goldman analysts said.
According to the report, “Containing domestic Covid is a top priority for the local officials.”
China’s leaders stressed that stability was key to ensuring peace and security at the annual annual economic planning meeting in December.
Many analysts believe China will keep its strict policy of preventing the spread of pandemics to a minimum until fall. The meeting will be held by the Chinese Communist Party, which is expected to present President Barack Obama with a speech. Xi JinpingA third unprecedented term.
In the immediate aftermath of the Beijing Winter Olympics, which kickoff Feb. 4, authorities want to ensure that the Lunar New Year does not contribute to any further outbreaks. According to Goldman analysts, the holiday travel season will run from January 17 through February 25,
We are falling short of Beijing’s GDP goal?
The Chinese authorities will likely announce at the March annual meeting a forecast for growth of at least 5.5% in 2022.
The analysts noted that it is above Goldman’s revised GDP prediction of 4.3%.
On Jan. 10, 2022 the streets of Tianjin (China) are empty as the city goes into partial lockdown due to an increase in cases of omicron.
Geno Hou | Future Publishing | Getty Images
The bank analysts suggested Beijing could use more stimuli to bridge the potential gap between real growth and GDP target. discard the growth target — as was the case in 2020.
Also, they noted instances where weakening in certain growth indicators did not allow the government to meet its target.
It is often doubtful that China’s official data on economic status are accurate.
According to Goldman analysts, “Lastly, there is a possibility that we underestimate the impact of Omicron or Covid on growth, given our experience in dealing with this virus within the public health system and the ongoing improvements made in domestic virus control protocols and border quarantine.”
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