By Kevin Yao
BEIJING (Reuters) – China’s economy likely grew 4.6% in the first quarter from a year earlier – the slowest in a year despite tentative signs of steadying, a Reuters poll showed on Thursday, maintaining pressure on policymakers to unveil more stimulus measures.
Gross domestic product (GDP) in the world’s second-biggest economy is also expected to grow at a subdued 4.6% pace in 2024 year-on-year, according to the median forecast of 86 economists polled by Reuters, falling short of the official target of around 5.0%.
Analysts are forecasting an even slower rate of growth for 2025 of 4.4%
The first-quarter growth forecast compares to 5.2% in the previous three months and is the lowest since the January-March quarter in 2023, underlining the strains in the economy despite stronger than expected January-February data on factory output and retail sales, as well as exports.
Analysts expected growth to pick up to 5.0% in the second quarter, but policymakers have their work cut out in trying to shore up confidence and demand.
China’s economy has struggled to mount a strong and sustainable a post-COVID bounce, burdened by a protracted property downturn, mounting local government debts and weak private-sector spending.
The government has unveiled fiscal and monetary policy measures in a bid to achieve what analysts have described as an ambitious 2024 GDP growth target, noting that last year’s growth rate of 5.2% was likely flattered by a comparison with a COVID-hit 2022.
“The economy has yet to recover,” Ting Lu, chief China economist at Nomura, said in a note. “The property sector is still on the decline, the risk of another fiscal cliff is on the rise, geopolitical challenges are likely to sustain, and growth might face downward pressure again over the next few months.”
Fitch cut its outlook on China’s sovereign credit rating to negative on Wednesday, citing risks to public finances as Beijing channels more spending towards infrastructure and high-tech manufacturing, amid a shift away from the property sector.
China’s consumer inflation cooled more than expected in March, while producer price deflation persisted, suggesting policymakers may need to launch more stimulus to spur demand.
On a quarterly basis, the economy is forecast to expand 1.4% in the first quarter, quickening from 1.0% in October-December, the poll showed.
The government is due to release first quarter GDP data, along with March activity data, at 0200 GMT on April 16.
MORE POLICY SUPPORT NEEDED
The Asian Development Bank (ADB) on Thursday raised its forecast on China’s 2024 economic growth to 4.8% from 4.5% previously, citing stronger household consumption.
“Effective measures to resolve property sector problems and strengthen private investment and household consumption should be enhanced this year to support growth momentum,” the bank said.
The People’s Bank of China (PBOC) has pledged to step up policy support for the economy this year and promote a rebound in prices.
Analysts polled by Reuters expected the central bank to cut the banks’ reserve requirement ratios (RRR) by 25 basis points (bps) in the third quarter, following a 50-basis point cut earlier this year, which was the biggest in two years.
Xuan Changneng, a deputy governor of the PBOC, said in late March that there was still room for cutting RRR.
Consumer inflation will likely pick up to 0.7% in 2024 from 0.2% in 2023 – well below the government’s target of around 3%, and rise further to 1.6% in 2025, the poll showed.
Some analysts believe the central bank faces a challenge as more credit is flowing to production than into consumption, exposing structural flaws in the economy and reducing the effectiveness of its monetary policy tools.
(For other stories from the Reuters global long-term economic outlook polls package:)
(Polling by Devayani Sathyan, Anant Chandak and Milounee Purohit; Reporting by Kevin Yao; Editing by Shri Navaratnam)
