China’s Q1 GDP growth rebounds to 4.0%, 2023 rate to 5.4%

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BEIJING — China’s gross domestic product is likely to increase in the first quarter of the year, a Reuters poll showed on Friday, as the end of strict COVID-19 restrictions helped lift the world’s second-largest economy out of a crippling pandemic-induced recession.

GDP growth in the first quarter rose to 4.0% from a year earlier, from 2.9% in the previous three months, according to the median forecast of 70 economists polled by Reuters. That would be the fastest growth since the first quarter of last year.

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The poll shows that by 2023, growth is expected to accelerate to 5.4%, from 3.0% last year – one of the worst performances in nearly half a century due to measures strict restrictions on COVID-19.

Recent data show the economy is recovering gradually but unevenly, led by consumption, services and infrastructure, but slowing inflation and rising bank savings raise doubts on the strength of domestic demand.

“We have seen benefits from the COVID policy shift on consumption and investment, including stronger-than-expected exports,” said Zhang Yiping, economist at China Merchants Securities in Shenzhen. “Domestic demand is improving but the strength of the recovery is not enough.”

Policymakers have pledged to ramp up support for the world’s second-largest economy, which is recovering from disruptions caused by the abrupt lifting of COVID-19 restrictions in December.

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The government has set a modest target for economic growth of around 5% this year, after missing the 2022 target.

A Reuters poll shows that growth is then expected to slow to 5.0% by 2024.

The government will release first-quarter GDP data, along with March activity data, at 02:00 GMT on April 18.

FABRIC RECOVERY

China’s exports unexpectedly surged in March this week, data showed this week, but analysts warn that the improvement is partly a reflection of suppliers catching up on unfulfilled orders. following a disruption due to COVID-19 last year.

New bank lending hit an all-time high in the first quarter, but consumer inflation fell to an 18-month low and factory gate deflation deepened in March, raising the possibility that more easing to promote economic recovery.

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Households added a staggering 9.9 trillion yuan in bank deposits in the first quarter alone, more than half of the 17.8 trillion yuan for the whole of 2022.

On a quarterly basis, the economy is forecast to grow 2.2% in January-March, compared with flat rate in October-December, the poll showed.

To support growth, policymakers will rely on a combination of monetary easing and moderate infrastructure spending, alongside efforts to boost the real estate sector. The central bank has promised “correct and strong” policy this year to support the economy, keep liquidity reasonably plentiful and reduce funding costs for businesses.

Analysts polled by Reuters expect central bank to leave benchmark lending rate unchanged – one-year loan Basic interest rate (LPR) and banks’ reserve requirement ratio (RRR) – through 2023.

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However, some analysts believe the central bank could make a small LPR cut in the coming weeks if inflation slows further.

The central bank, which cut the RRR – the amount of cash that banks must hold in reserve – in March, has kept its benchmark lending rate unchanged since September.

“We need to maintain the stability and continuity of macroeconomic policies to underpin the economic recovery,” said Wen Bin, chief economist at China Minsheng Bank.

“There is still room to cut the RRR, but a cut in the near term is unlikely.”

The poll shows consumer inflation is likely to accelerate to 2.3% in 2023 from 2.0% in 2022, before stabilizing in 2024.

(For other stories from Reuters’ global long-term economic outlook poll:)

(Polling by Veronica Khongwir and Devayani Sathyan in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Sam Holmes)