China on track for GDP target for 2022 despite COVID shock – government economists – Metro US
China on track for GDP target for 2022 despite COVID shock – government economists – Metro US

China on track for GDP target for 2022 despite COVID shock – government economists – Metro US

BOAO, China (Reuters) – China is still on track to reach its 2022 growth target of around 5.5% as it has ample room for stimulation, government economists said on Wednesday, despite a resurgence of COVID-19 cases, that has prompted private analysts to cut back on their forecasts.

“The goal is achievable despite the pandemic,” said Zhang Yuyan, head of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences (CASS), a top government think tank, at the annual Boao Forum for Asia.

“There is still room for lowering interest rates and reserve requirements (RRR), and there is room for a more proactive fiscal policy,” he told reporters at the forum held in southern Hainan province.

Zhang said China’s inflation outlook remains benign, which could give the central bank more room to ease policy.

Xiong Aizhong, another economist at CASS, also said China has ample political space to help it reach its goal.

“Compared to developed economies, our policy space is relatively large as our inflation is relatively low and the debt burden is relatively low,” he said.

Meanwhile, the International Monetary Fund and several foreign banks have downgraded their growth forecasts in China as authorities struggle to control the resurgence of COVID-19, mainly in Shanghai’s financial center amid the Ukraine crisis.

On Tuesday, the IMF lowered its forecast for China’s growth to 4.4% in 2022 from 4.8% it predicted in January.

DBS has downgraded its growth forecast for China for 2022 to 4.8% from the previous 5.3%, while Barclays has reduced its outlook to 4.3% from 4.5%.

“Beijing’s GDP growth target of around 5.5% this year is becoming increasingly challenging, and we are now seeing remarkable downward risks to our annual GDP growth forecast of 4.3%,” Nomura economists said in a note.

Unlike most major economies, which have begun to tighten monetary policy to combat inflation, China has stepped up its easing to mitigate the slowdown.

Zhang warned that a political divergence between China and the United States could boost capital outflows from the country.

On Tuesday, China’s central bank surprisingly kept its benchmark lending rates unchanged, even after recently reducing the amount of cash that banks have to set aside as reserves.

Sanctions imposed by the United States against Russia could cause some countries to embrace the yuan in trade settlements and foreign exchange reserves, and China should make the yuan more flexible and convertible, Zhang said.

(Reporting by Kevin Yao; Editing by Jacqueline Wong)

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