JP Morgan raises China growth forecasts as country braces for Covid-19 spike
JP Morgan has hiked its growth forecasts for China, after the sudden removal of its ‘zero-Covid’ laws paves the way for a brighter economy.
The US bank now expects China’s gross domestic product (GDP) to grow by 30 basis points to 4.3 per cent next year.
“The most important development in the past month is earlier reopening with a faster pace. Our analysis has taken into account a transitional pain period before the economy enters a strong recovery,” JPM said.
However, fellow banking giant ING is less optimistic.
The loosening of strict Covid-19 restrictions in China is unlikely to be the silver bullet the local economy needs, chief economist at ING, Iris Pang, said last week, after China announced the removal of its remaining coronavirus laws.
“Moving from isolation facility quarantine to home quarantine will not increase retail sales significantly,” she wrote.
“In short, economic growth in December and January will not be overly impressive, though we expect a quarter-on-quarter improvement in GDP from -0.4 per cent year-on-year in the fourth quarter of this year to 3.4 per cent YoY in the first quarter of 2023.”
However, Pang noted that the use of fewer Covid-19 tests will help trim down the fiscal deficit the government is facing.
Factories brace for a spike
China’s tough Covid-19 measures has ravaged its bustling industrials sector, stamping out activity in the world’s second largest economy.
Apple’s iPhone supplier Foxconn has announced today it is easing restrictions at its largest factory in China, ending the so-called ‘closed loop system’ which saw workers sleep in dormitories to contain infections.
However, factories are expected to be bracing for a spike in cases after the easing of restrictions.
China has struggled with low vaccination rates among the elderly, but successive lockdowns have weakened the immune systems of people around the world.
Analysts at risk consultancy Eurasia Group said: “Authorities have let cases in Beijing and other cities spread to the point where resuming restrictions, testing and tracing would be largely ineffective in bringing outbreaks under control.”