China's economic growth faces pressure amid global uncertainty: ADB
Developing Asia's economies are forecast to grow 5.2 percent this year and 5.3 percent in 2023, thanks to a robust recovery in domestic demand and continued expansion in exports, but uncertainties stemming from the Russia-Ukraine crisis, the continuing COVID-19 pandemic, and tightening by the U.S. Federal Reserve pose risks to the outlook, according to Asian Development Bank's (ADB) Asian Development Outlook released on Wednesday.
Yolanda Fernandez Lommen, country director of the ADB for China, shared her insights on China's economic growth forecast and the impact amid the Russia-Ukraine conflict in an interview with CGTN.
She said the economic growth in China will slow this year and in 2023, after recovering in 2021, as domestic demand remains lackluster despite continued export strength and increased fiscal support. China's economic growth will be 5 percent in 2022 and 4.8 percent in 2023, according to ADB's outlook.
"Economic growth is expected to remain moderate in early 2022 before picking up slightly in the middle of the year," Fernandez Lommen said. "Reforming fiscal relations between the central government and local governments is key to narrowing the local government fiscal gap and equalizing the delivery of basic public services across regions."
"On the one hand, we have seen in January and February an important pickup in infrastructure investment and exports have remained very solid. However, we (have) also seen persistent weaknesses in the housing sector that is a very important driver of growth. It accounts for about 20 percent of GDP growth and the impact on consumption and services of the lockdowns that are more prominent in March," she said.
Domestic demand is expected to improve gradually this year. The persistence of COVID-19 infections continues to weigh on consumer confidence and dampen growth in household demand. Investment looks set to improve in 2022. Real estate investment will likely pick up, with borrowing curbs on the sector sustained but adjusted to facilitate market stabilization and gradual recovery.
External risks include economic spillover effects from the Russia-Ukraine conflict and frictions in global value chains caused by temporary supply shortages or transport bottlenecks.
She said that the biggest challenge will be to cope with the external factors, like oil price, energy price, uncertainty of the Russia-Ukraine conflict and the pandemic. Fernandez Lommen illustrated that stimulating the economy, while fighting the uncertainty and these unexpected factors, will be the main challenge for policy makers in China to balance the economic performance.
Amid the Russia-Ukraine conflict, many economies are fighting inflation. The uncertainty also delays important business decisions.
"In the case of China, the main channel for impact will be energy prices. But so far, they have been absorbed quite well and they have not been passed to the consumers or very widely. We still have to see what will happen with food prices that are also expected to be affected in coming months."
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