economic recovery remains “fragile”, according to the World Bank

2023-06-14 09:13:00

Freed since the end of 2022 of the anti-Covid measures which penalized its activity, China recorded a marked acceleration in its growth in the first quarter (+4.5% over one year). But the recovery is running out of steam and remains uneven.

“The reopening (of China thanks to the lifting of health restrictions) has led to a recovery (of activity), but this remains fragile”, notes the World Bank in a report devoted to the economic situation of the country, published this Wednesday, June 14.

And to highlight some of the difficulties of the Chinese economy: “continuing uncertainty” households regarding the recovery (which translates into a high level of savings harming consumer spending), difficulties in the real estate sector, uncertain global growth which weakens Chinese exports but also worsening geopolitical tensions…

China’s economy struggles to recover following Covid restrictions lifted

Government action expected

The World Bank estimates that, “To address some of these vulnerabilities, measures beyond short-term macroeconomic support will be needed.” Economists rightly urge the Chinese government to resort to a vast support plan to support growth. But the authorities seem to rule out this option for the time being. They have however agreed in recent days to some interest rate adjustments, but in the opinion of analysts the impact of these measures should be limited.

China: surprise rate cut to revive the economy

“A faster job market recovery might boost (household) confidence and contribute to stronger consumption growth,” one of the engines for the recovery, underlines the World Bank. The unemployment rate for Chinese people aged 16 to 24 hit a record high of 20% in April. The figure for the month of May will be unveiled on Thursday.

Strong but still weak growth

Despite the challenges facing the country, its gross domestic product (GDP) should grow by +5.6% this year, according to an upwardly revised forecast by the World Bank. The previous one in March was counting on +5.1%. That is to say levels almost similar to the estimates of the OECD, which is counting on Chinese growth this year at +5.4% (+0.1 point compared to its March forecasts) and at +5.1% the year. next (+0.2 point).

The Chinese government has set itself a target of “regarding +5%”, one of the lowest in decades. It would, however, be better than 2022, when its gross domestic product (GDP) increased by +3%. Still, even this threshold might be difficult to reach, Chinese Premier Li Qiang has already warned.

(With AFP)