(Reuters: Bank of America (NYSE) slashes its outlook on China’s economic growth on Tuesday for the second consecutive month. It cites delays in key policy support by the central bank following an energy crisis in China that impacted large industrial sectors.

Although the world’s second largest economy is recovering from the pandemic, momentum is slowing due to difficult responses to the new coronavirus outbreaks in the Delta and supply chain bottlenecks as well as problems with real estate debt.

Some analysts had expected this would result in large scale policy easing but authorities have signalled this is unlikely https://www.reuters.com/business/china-will-maintain-prudent-monetary-policy-says-cbank-official-2021-09-07, and have focused on more targeted moves.

BofA lowered its China real GDP (GDP) forecast this year from 8.0% to 7.7%. It also reduced its 2022 forecasted GDP to 4.0% from 5.3%, due to the delayed effects of policy easing.

It expects that growth will stabilise at 5.3% by 2023, slightly less than the 5.8% forecast.

After Monday’s data revealed that China had suffered power outages, which lowered factory output to levels seen only in 2020 early. Furthermore, the downgrades follow challenges facing the property sector and a slowdown in GDP growth during the third quarter.

A report that was included with the downgrade stated, “Though we believe Chinese policymakers entered the catchup mode in September, it could take some time for any new steps to kick in.”

Although the authorities quickly responded to provide electricity and coal supply, they anticipate that industrial production will be affected for at least another month by power outages.

There have been concerns about the potential spillover consequences of China Evergrande Group, a property giant that could default on $305 billion worth of debt. This has prompted several global investment banks to downgrade their GDP in recent days.

BofA, Tuesday’s prediction by the People’s Bank of China that its loan prime would be lowered by the end of 2018, but feared macro instability due to the “delay of effective policy easing” and slow credit expansion.