Fitch Ratings has lowered China’s gross domestic product growth forecast for 2022 due to Covid-19 blockades that have held back the economy.
The agency lowered its growth estimate to 4.3% from 4.8%, the agency said in a statement on Tuesday. China’s economic activity plummeted in April when restrictions imposed to stop the spread of the virus closed factories, hampered mobility and disrupted supply chains.
While Fitch expects the disruptions to ease this month, the agency cites ongoing risks, including the possibility that China’s restrictions will not be able to quickly control new outbreaks, or a potential delay in easing current restrictions. China is expected to strictly adhere to its Covid Zero strategy until 2023, Fitch reports.
In recent weeks, banks from UBS Group AG and Barclays Plc to Standard Chartered Plc and Bank of America Corp have cut China’s economic growth forecasts for the full year as the country maintains tight restrictions on viruses to try to stop the revival. Economists surveyed by Bloomberg last month once again lowered their growth forecast for 2022 to 4.9%.
Fitch expects additional policy support in the coming quarters, including accelerating infrastructure investment and further lowering interest rates and reserve requirements.
“However, the adjustments are likely to be modest amid tightening monetary policies by other major central banks and the Chinese government’s warning that rising interest rate differentials could put pressure on capital outflows,” Fitch said.
© 2022 Bloomberg