Goldman Sachs Group Inc. forecast China’s economy will grow 3% this year, slower-than-previously expected, after latest data showed a slump in demand and near-term headwinds, including resurgent Covid-19 outbreaks and power supply constraints.
The investment bank lowered its projection for gross domestic product growth from 3.3% seen earlier, as it cut the third- and fourth-quarter estimates.
Weaker-than-expected July data, along with muted inflation and sluggish credit growth “confirmed the lack of domestic demand,” economists led by Hui Shan wrote in a report to clients, adding that Covid-19 cases are rising, power supply is stressed due to the hot summer, and major new stimulus is unlikely.
The new forecast is also below the consensus of 3.8% in a Bloomberg survey and puts the around 5.5% growth target set by Beijing in March further out of reach. Goldman economists are the latest to join several others in cutting China forecasts. Analysts at ING Groep NV and TD Securities Inc downgraded their full-year GDP projections to 4% and 2.9%, respectively, while Nomura Holdings Inc. -- which projects a 3.3% expansion -- said the market is still “too optimistic about growth.”
China’s economic slowdown deepened in July due to a worsening property slump and continued coronavirus lockdowns. Major indicators including retail sales, industrial output and investment all slowed and missed economists estimates last month.
The adjustments imply growth for the third quarter will be 3.5% from a year ago, slower than the earlier forecast of 4.3%, while that for the fourth quarter was cut to 3.3% from 3.8%, the Goldman economists wrote.
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