S&P Global Lowers China's Economic Growth Forecast to 5.2%

S&P, one of the world's top three credit rating agencies, announced that the economic reopening effect after the COVID-19 pandemic is appearing slower than expected and has downgraded China's economic growth forecast for this year.

According to major foreign media on the 26th (local time), S&P Global lowered its forecast for China's GDP growth rate this year by 0.3 percentage points from the previous 5.5% to 5.2% in a report released the day before. S&P stated, "Investment and industry are lagging, so the recovery of the Chinese economy is expected to proceed at an uneven pace."

Following the confirmation of weak Chinese economic indicators in May, forecasts for China's economic growth rate this year have been repeatedly downgraded. China's May retail sales, industrial production, trade, and investment indicators all fell short of market expectations. The youth unemployment rate for ages 16 to 24 reached a record high of 20.8%, indicating that employment is already heading toward the worst situation, and foreign direct investment from January to May decreased by 5.6% compared to the same period last year.

In response, the People's Bank of China, the country's central bank, resumed cutting policy interest rates on the 20th as expected after 10 months to stimulate the economy, and the State Council formalized strengthening economic support measures through a commerce meeting, signaling additional economic stimulus measures.

[Image source=Reuters Yonhap News]

Goldman Sachs lowered its forecast for China's GDP growth rate this year from 6% to 5.4%, citing disappointment over the low intensity of stimulus. It explained, "The level of future policy easing is unlikely to exceed past levels, including during the 2020 recession," and "Policymakers are likely constrained by economic and political considerations from implementing meaningful stimulus measures, so the growth headwinds are expected to continue."

Global investment banks such as UBS, Standard Chartered, Bank of America, JP Morgan, and Nomura also downgraded their forecasts for China's economic growth rate this year from the previous 5.5?6.3% range to 5.1?5.7%.

Goldman Sachs pointed out that the downturn in the real estate market, which had a high contribution to growth, is more severe than expected, and presented a growth forecast of 5.4%, 0.6 percentage points lower than the previous 6.0%. Goldman Sachs had the largest downward revision among investment banks.

JP Morgan lowered its growth forecast for China this year from 5.9% to 5.5%, and UBS also lowered it from 5.7% to 5.2%. Japan's Nomura forecasted China's economic growth rate at 5.1%, which is 0.4 percentage points lower than the previous forecast of 5.5%.

Nomura predicted that a combination of declining corporate confidence, negative sentiment, a fiscal cliff caused by a collapse in real estate sales, limited (policy) tools, and delays in decision-making speed may prevent stimulus measures from reversing the situation.

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