China’s Fourth-Quarter GDP Growth Will Hit Low in 1.5 Years, Putting Pressure on Policymakers | Investment News
BEIJING (Reuters) – China’s economy likely grew at the slowest pace in a year and a half in the fourth quarter, driven by weaker demand due to a housing slowdown, debt reduction and stringent measures against COVID-19, prompting policymakers to roll out more easing measures.
Monday’s data is expected to show gross domestic product (GDP) rose 3.6% in October-December from a year earlier – the weakest pace since the second quarter of 2020 and slowing from 4.9% in the third quarter, according to a Reuters poll.
On a quarterly basis, growth is expected to reach 1.1% in the fourth quarter, compared to 0.2% in July-September.
For 2021, GDP likely grew by 8.0%, which would be the highest annual growth in a decade, partly due to the low base set in 2020, when the economy was rocked by COVID- 19 and strict containment measures.
The government is due to release GDP data, along with December activity data, on Monday at 02:00 GMT.
The world’s second-largest economy, which has cooled over the past year, faces multiple headwinds in 2022, including continued weakness in housing and a new challenge from the recent local spread of the highly contagious variant. of Omicron.
Exports, which were one of the few bright spots in 2021, are also expected to slow, while the government is expected to continue its crackdown on industrial emissions.
Policymakers have vowed to avoid a steeper downturn ahead of a key Communist Party congress later this year.
The central bank is set to unveil more easing measures, though it will likely favor injecting more liquidity into the economy rather than cutting interest rates too aggressively, officials said. political insiders and economists.
Analysts polled by Reuters expect the central bank to take more modest easing measures, including cutting banks’ reserve requirement ratios at the prime one-year loan rate (LPR) – the lending rate of reference.
ANZ analysts said in a note that they saw a possibility that the central bank would cut the rate on its medium-term lending facility (MLF) on Monday.
Policymakers also pledged to strengthen fiscal support for the economy, accelerating the issuance of special bonds by local governments to boost infrastructure investment and providing for more tax cuts.
“We may see a larger effect from monetary and fiscal easing only in the second half of 2022 due to transmission lags of these policies,” Natixis analysts said in a note.
“The recent monetary easing and the stabilization of the PMI (factory activity) have indicated such a direction, but further efforts are needed to stimulate investment in fixed assets.”
Growth is expected to slow to 5.2% in 2022, according to the survey.
(Reporting by Kevin Yao; Editing by Kim Coghill)
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