Morgan Stanley lifts China GDP forecast on reopening and easing

Morgan Stanley economists upgraded their forecast for China’s gross domestic product growth in 2023 on expectations that the rapid reopening from Covid Zero and continued steps to ease policy will boost the economy. But an analyst has criticised the sudden reopening, saying it does not make sense.
The bank raised its projection to 5.4% growth from 5%, expecting that mobility and economic activity will rebound to the levels seen in June and July of this year by the end of the first quarter, economists including Robin Xing wrote in a note on Tuesday. They expect a continued recovery to above pre-pandemic levels through the rest of 2023.
While economic growth will suffer some near-term pain at the start of the year as Covid infections peak and disrupt production and consumption, risks to the supply chain are likely to be manageable compared to how Covid lockdowns hampered operations, the economists wrote.
A “full-court policy press for growth” will also take shape, they added.
“From our perspective, policymakers are taking concerted action to lift growth across all fronts,” the economists wrote. “This is the first time since 2019 where domestic macro policies and Covid management are aligned in supporting a growth recovery, rather than acting as countervailing forces.”
Morgan Stanley’s upgrade comes as other banks have also revised their forecasts for China’s growth upward.
Australia & New Zealand Banking Group lifted its forecast for 2023 growth to 5.4% in November. Nomura Holdings raised its estimate to 4.8% earlier this month. The consensus estimate for 2023 growth is 4.8%, according to a Bloomberg survey.
The Chinese Academy of Social Sciences, a state-run think tank, has forecast China’s economy will expand by 5.1% next year, according to a report by local media 21st Century Business Herald. The country should set a growth target at above 5%, CASS researchers said in a report.
Senior Chinese officials are debating an economic growth target for next year of around 5%, Bloomberg News reported earlier this month.
Authorities may add more fiscal stimulus to spur infrastructure investment next year.
The quota allocated for new special local government bonds – a key source of infrastructure funding – may exceed 4.4 trillion yuan ($632 billion) in 2023, according to a report by China Securities Journal on Wednesday that cited Kuang Peiqin, an analyst at Zheshang Securities Co. That would top 2022 levels.
‘Rapid and explosive’
Meanwhile, an analyst says China seems to be embracing a fast and explosive Covid reopening.
Bloomberg Intelligence’s chief ...
13 Dec 2022 11PM English South Africa Business News · Business

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