Loosening Covid-19 laws in China will not be economy’s silver bullet, says ING
The loosening of strict Covid-19 restrictions in China Is unlikely to be the silver bullet the local economy needs, according to banking giant ING.
China announced today that it is further relaxing its pandemic measures, meaning only those working in high-risk positions and located in elderly homes, hospitals, child care and primary schools will need proof of a negative test before going to their workplace.
While other institutions can determine their own specific Covid-19 measures. And positive patients with less severe symptoms can quarantine at home instead of staying in isolation facilities.
In a note today, chief economist at ING, Iris Pang, said the bank is not “overly optimistic” about the country’s growth prospects, after a controversial ‘zero-Covid’ stance stamped out economic activity.
“Moving from isolation facility quarantine to home quarantine will not increase retail sales significantly,” she wrote.
However, Pang noted that the use of fewer Covid-19 tests will help trim down the fiscal deficit the government is facing.
It also would not be the first time the country has tracked back on so-called ‘reopening’ pledges.
“Consumption should recover in 2023 but there might not be any big jump as wage growth in the manufacturing sector could be sluggish given the risk of recession in the US and Europe in the first half of next year,” added Pang.
“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.”
Beijing’s strict adherence to tough Covid-19 prevention measures has hobbled the Chinese economy, fresh figures out today revealed.
Exports from the world’s second largest economy dropped 8.7 per cent over the year to November, a much deeper fall than analysts were expecting and dwarfing the 0.3 per cent decline in October.
Key trade hubs and factories in China have been forced to railroad production suddenly due to Chinese lawmakers launching snap lockdowns to tame virus outbreaks.
That has cut the volume of goods and services and weighed on exports. Weaker demand from western consumers due to their real incomes being knocked by roaring inflation has also dragged down exports.