The World Bank lowers its growth forecasts for the Chinese economy

China's GDP is expected to grow by 2.7% this year, rising to 4.3% in 2023. These growth forecasts for the Chinese economy have been revised downwards by the World Bank, against a backdrop of slowdowns linked to Covid-19 and difficulties in the real estate sector.

Growth prospects subject to major risks

In a report published on December 20, 2022, the World Bank says it has reduced its growth forecasts for China from 2.8% to 2.7% this year and from 4.5% to 4.3% for 2023.

" China's growth prospects are subject to significant risks, resulting from the uncertain trajectory of the pandemic, the way policies evolve in response to the COVID-19 situation, and the behavioral responses of households and businesses ," said the international institution.

On the health front, China quickly did an about-face in early December, lifting a number of restrictions on its zero Covid policy that had been in place for nearly 3 years. Specialists fear that the population is not sufficiently prepared for the wave of contaminations linked to this reopening, especially as millions of vulnerable people are still not vaccinated. For fear of catching the virus, many Chinese are staying at home, penalizing consumption.

In the real estate sector, the country is going through an unprecedented crisis, particularly since the measures adopted by Beijing in 2020 to reduce corporate debt came into force. Real estate sales are down in several cities, impacting the construction market and the thousands of companies working in it.

" Persistent tensions in the real estate sector could have wider macroeconomic and financial repercussions ," warns the World Bank.

Increase vaccination rates among vulnerable people

Faced with these downgraded growth prospects, the World Bank is calling on the Chinese authorities to act sw iftly to bring about " a safer, less disruptive reopening " by increasing vaccination rates for the most vulnerable.

It recommends " the deployment of a recall campaign ", " increased access to effective treatments " and better management of hospital capacity for the treatment of severe cases.

Supporting short-term macroeconomic policy

" Continued macroeconomic policy support will be needed in the short term, as the economy remains below potential and the global environment weakens," says the World Bank.

The international financial institution believes that China is in a position to adopt far-reaching structural reforms while taking action to support its economy. To this end, it recommends that China devote a larger budget to social spending and green investment.