Kevin Yao

BEIJING, (Reuters) – China’s growth will slow to 5.0% by 2022, a Reuters poll revealed. This is due to renewed COVID-19 epidemics, and a weakening global recovery. It also raises pressure on the central banks to relax policy.

In 2022, the forecast growth rate would fall below the 5.2% that analysts predicted in Reuters’ January poll. It suggests that there is a steep learning curve ahead for the government to reach its goal of 5.5%. In 2023, growth is forecast to increase to 5.2%.

According to the median predictions of 41 economists polled at Reuters, the GDP likely grew by 4.4% in the quarter. This was higher than the 4.0% in the fourth quarter due to a strong start to the second half.

According to analysts, March’s activity may be affected by China’s attempts to control its largest COVID epidemic since late 2019 when the coronavirus first appeared in Wuhan.

Analysts at Societe Generale (OTC) stated in a note that March activity data was likely to show a significant deterioration. However, this would only be the tip of iceberg since the economically destructive lockdowns started in mid-March.

The infrastructure push and reporting methods as well as the strong data in January and Februar might help to keep real GDP growth above 4%.

The poll revealed that quarterly growth will fall to 0.6% from 1.6% October-December.

On April 18 at 20:00 GMT, the government will release data on first quarter GDP and March activity.

Although the GDP increased 8.1% in 2021 which was the best performance in a decade it has seen, the momentum began to slow down over the last year. The reason for this is due in part to the debt problems that plague the property market as well as anti-virus measures that have impacted consumer spending and confidence.

Policymakers placed a lot of emphasis on debt and property risk last year. This contributed to the slowdown in economic growth.

CARDS – MORE EASING

This year’s fiscal stimulus includes a stepped up in local bond issuance for infrastructure projects and a reduction of taxes for business.

China will support its economy by timely cutting banks’ reserves requirement ratios (RRR), the cabinet stated Wednesday. This is in response to headwinds that have increased amid COVID-19.

According to poll, the People’s Bank of China will likely reduce the RRR (the amount of cash banks have to hold as reserves) by 50 basis points in the second quarter of 2022.

Citi economists believe a 50 basis point reduction will be made as soon as Friday. The move would allow Citi to release more than 1.2 trillion yuan ($188.52billion) in liquidity. However, the note said that while the likelihood of a medium-term rate cut is lower, the LPR (loan prime rate) may still be cut on April 20.

The poll revealed that analysts believe the PBOC would reduce the benchmark rate for lending, one-year LPR by 10 basis point in the second quarter.

Last January, the PBOC cut the 1-year LPR by 10 base points and the RRR was cut by 50 in December.

The poll found that consumer inflation will rise to 2.2% by 2022, from 0.9% in 2020, and then to 2.3% in 2023.

(For additional stories in the Reuters global longer-term economic outlook polls bundle:

($1 = 6.3653 )

(Polling by Vijayalakshmi Srinivasan, Arsh Mogre, Devayani Sathyan in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Sam Holmes)