Economists maintain China's 5.3 percent GDP growth forecast in 2023

Huang Yixuan
With a strong post-COVID economic rebound and government initiatives to revive consumption, most economist continue to forecast a 5.3 percent or above GDP growth in China for 2023.
Huang Yixuan

Most economists maintained their forecasts of China's GDP growth in 2023 at 5.3 percent or above, after the country announced its official GDP target at the National People's Congress.

Premier Li Keqiang announced a lower than expected 5 percent growth target when delivering the government work report at the NPC, China's national legislature, on Sunday.

"Overall, we view it as a relatively conservative but pragmatic proposal for delivering a healthy and organic economic recovery from last year's huge disruptions caused by COVID, and we see no sign of a massive stimulus program," said Lu Ting, chief China economist of Nomura.

The GDP growth target of "around 5.0 percent" is a reasonable and rational choice, as China's economy is still set to face with multiple headwinds over the course of the year, Lu said.

"We continue to expect China's GDP growth to pick up to 5.3 percent this year from 3.0 percent last year, and caution against being overly optimistic regarding the pace of recovery this year."

UBS, meanwhile, upgraded its China GDP growth forecast for 2023-2024 to 5.4 percent and 5.2 percent, respectively, from the earlier 4.9 percent and 4.8 percent.

The "around 5 percent" target was consistent with what UBS had expected in its baseline, it said. Also as expected, while the government emphasized the importance of reviving consumption, no nationwide consumption stimulus or income subsidy was announced.

Macro policy stance is also in line with the Central Economic Work Conference, with a slightly larger fiscal deficit set at 3 percent of GDP and special local government bond quota of 3.8 trillion yuan (US$545 billion) as well as modestly supportive monetary policy.

"Economic re-opening is proceeding better than we had expected earlier – the feared 'second-wave' of coronavirus did not materialize and there was little sign of supply disruptions," said Wang Tao, head of Asia economics and chief China economist of UBS Investment Bank.

"Recent 30-city property sales rebounded close to the 2019 level, suggesting that property sales may have bottomed earlier than we had originally expected," Wang added.

She also noted that the global economy has been more resilient than she thought earlier, and there is some potential upsides on domestic policy support.

Betty Wang, senior China economist of the Australia and New Zealand Banking Group, said the conservative 5-percent growth target, likely set last December, may not take the recent faster-than-expected economic recovery into consideration.

"In addition, the government transition in 2023 may bring uncertainty in policy execution and may be another reason for a conservative growth target," she added.

"For now, we maintain our GDP forecast at 5.4 percent," said ANZ's report.

Also, the gap between the lower GDP target and a higher urban job creation target of 12 million, up from 11 million, suggests a need for structural policies like urbanization to support growth, it pointed out.

It noted that China has a historic high of 11.58 million new graduates entering the job market in 2023, 7.6 percent higher than in 2022, whose employment is crucial for social stability and urban housing demand in the next few years.

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