Economic reopening of China being delayed might push GDP growth down by 1%

According to a statement made by Louise Loo, senior economist at Oxford Economics, there’s a possibility of long-awaited recovery in private consumption in China being delayed. This might happen in case the country’s economic reopening is rescheduled to the first half of 2024. As she wrote in her report on Friday, such an outcome might affect growth forecasts and push the projected level down by 1%.

Risks to the medium-term macroeconomic prospects also notably shifted to the downside, as was stated in Loo’s report, which is linked to the negative economic impact of the recent outburst of Covid. Worsened epidemiological situation led to lockdown measures tightening in many Chinese cities and regions. Nevertheless, the firm still expects a broad economic reopening to be started in the second half of the year 2023.

Recently announced Covid-related control measures sparked certain hopes of further reduce of economic damage among the markets. It was expected that the government would take more action to soften the consequences of lockdowns before the economy gradually returns to its full strength next year. However, a recent rapid growth of infection rate put a damper on any prospects of soon reopening, while many cities, including Beijing and Guangzhou, went back to severe restrictions and economic challenges.