World Bank Lowers China's Economic Growth Forecast to 8% This Year and 5.1% Next Year

Chinese President Xi Jinping (Photo by Yonhap News)

[Asia Economy Reporter Geum Bo-ryeong] The World Bank has downgraded its economic growth forecasts for China for this year and next year. This reflects the impact of COVID-19, the new Omicron variant, and a severe real estate sector downturn.

According to CNN on the 22nd (local time), the World Bank's latest report on the Chinese economy projected China's GDP growth rates for this year and next year at 8% and 5.1%, respectively. These figures are 0.1 percentage points and 0.3 percentage points lower than the forecasts released in October (8.1% for this year and 5.4% for next year).

The 5.1% growth forecast for next year is the lowest since 1990, when growth was only 3.9% due to international sanctions related to the 1989 Tiananmen Square massacre. The World Bank explained that "the number of downside risks to China's economic outlook has increased."

The new COVID-19 wave, including the Omicron variant, could lead to additional restrictions within China, significantly impacting economic activities. Furthermore, the ongoing slump in the highly leveraged real estate sector is expected to cause substantial disruptions across the economy.

Considering this situation, the Chinese government is showing signs of policy shifts. On the 20th, the People's Bank of China, the central bank, cut the loan prime rate (LPR), the effective benchmark interest rate, by 0.05 percentage points for the first time in 20 months. This move is expected to reduce borrowing costs for households and businesses, thereby boosting consumer spending and investment. Additionally, last week, the bank lowered the reserve requirement ratio to 8.4%, a 0.5 percentage point decrease.

The World Bank commented on the Chinese government's policy changes, stating, "In the medium term, China needs to restructure its economy on multiple levels to achieve high-quality growth."

This content was produced with the assistance of AI translation services.