China’s GDP to grow 8.5% this year, World Bank forecasts

Beijing, Jun 29 (EFE).- China’s gross domestic product is expected to grow 8.5 percent this year, and even out to 5.4 percent in 2022 and 5.3 percent in 2023, according to forecasts in a World Bank (WB) report released Tuesday.

The institution, based in Washington, DC, assesses that China’s recovery is continuing at a good pace but that “some risks remain” for its economy, and highlights that growth will decelerate once the base effects caused by the Covid-19 pandemic have been overcome.

“Improved consumer and business confidence and better labor market conditions will support a shift towards private domestic demand from public investment and exports,” the WB said.

The agency also expects that the drivers of Chinese economic growth “gradually transition” from industrial production to services.

“Risks to China’s economic outlook are broadly balanced. On the downside, repeated Covid-19 outbreaks could disrupt economic activity, despite efforts to suppress the spread of the virus,” indicated the agency.

“Bilateral tensions with key trading partners and financial stability risks associated with high corporate leverage and inflated property markets could also derail growth prospects.”

WB China director Martin Raiser foresees in the report that the macroeconomic policies of the Asian country should shift “from accommodative to more neutral settings” based on the recovery both domestically and globally.

However, the WB cites “medium-term challenges” for China such as “demographic headwinds, slowing productivity growth, a high level of inequality and remaining social vulnerabilities, and a carbon intensive production structure,” some exacerbated by the pandemic.

“Over the medium term, policymakers should redouble their efforts toward promoting growth-enhancing structural reforms and steering the economy onto a greener, more resilient, and inclusive development path,” WB lead economist for China, Sebastian Eckard, said.

Among these efforts, the report said “a more progressive tax system, investments in human capital and stronger social safety nets to reduce income inequality” could help achieve high quality growth.

“Structural reforms, such as enhancing market access, including in relatively closed service sectors, would also help increase competition, encourage innovation and boost productivity growth.”

China’s GDP grew 18.3 percent year-on-year during the first quarter of 2021, according to official data, due to the base effect, since the same period of the previous year was marked by the early stages of the pandemic, which led to the paralysis of the national economy and a contraction (the first in four decades) of 6.8 percent.

In the previous quarter, the last of 2020, the GDP of the Asian power had grown by 6.5 percent year-on-year, raising the average for the year, which ended up being 2.3 percent in 2020, the only major economy in experience a rise during the past year. EFE

jco/tw