China’s economic growth to hit 44-year low in 2020

October 29 23:34 2020
China’s economic growth to hit 44-year low in 2020

According to a Reuters’ poll, China’s economy will grow at its weakest pace in more than forty years even as it recovers steadily from the COVID-19-induced dive earlier in 2020. However, the poll also revealed that overall output could rebound sharply in 2021.

The world’s second-biggest economy is expected to expand by more than 2% in 2020, according to the median of 37 analysts surveyed by Reuters. The figure is down from the 2.2% growth projected in July. The figures make China the only economy to grow in the year, even as the country witnesses its slowest annual pace since the mid-seventies.

China’s economic recovery witnessed accelerationin Q3 as consumers shook off their COVID-19 caution. However, the growth brought to bear persistent risks, especially from resurgent COVID-19 cases across the globe as well as US-China tensions.

The poll also projected the economy to grow by 8.4% in 2021, as the global economy recovers from the health crisis.

“With exports strong and domestic consumption and investment both improving, Q4 could be one of the best quarters for overall growth in a few years,” according to analysts at research firm GavekalDragonomics.

“Growth momentum should peak in the first half of 2021, though base effects will confuse the data readings.”

China is currently facing long-term obstacles to maintain its growth, according to analysts. The company’s top government officials are holding key meetingsto design the country’s economic course for 2021-2025.

China is also looking to strike a balance between stabilizing economic growth and preventing risks, as debt continues to temporarily rise to support the COVID-19-hit economy, central bank chief Yi Gang said.

The government of the country has rolled out several recovery measures, such as more fiscal spending, tax relief and cuts in lending rates, and banks’ reserve requirements to support employment.

Analysts also expect China to keep its one-year loan prime rate (LPR) steady at 3.85%, at least, until the end of 2021. The central bank kept the LPR unchanged for the sixth straight month at its October fixing.

The Reuters poll also predicted that the benchmark deposit rate will remain unchanged until the end of 2021. This position is not surprising, considering that the PBOC has kept it at 1.5% for five years.

China’s consumer price index (CPI) in 2020 is expected to rise 2.7% from the previous year, a decrease from the 2.9% rise recorded in 2019, according to the poll. The poll has predicted the CPI to rise 2.1% in 2021.

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