China's economic growth to slow to 5% in 2022: ADB

“Economic growth is expected to remain moderate in early 2022 before picking up slightly in the middle of the year,” said ADB country director for China Yolanda Fernandez Lommen in the Asian Development Outlook (ADO) 2022.

“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,” he said.

The outlook for 2022 compares with ADB’s previous forecast of 5.3 per cent growth issued in December 2021, said an ADB press release.

Following modest food price deflation last year, inflation is projected to pick up in line with higher non-food prices, before easing marginally in 2023. Consumer price inflation is forecast at 2.3 per cent this year, notably higher than the 0.9 per cent inflation rate in 2021.

With commodity price pressures unlikely to subside in 2022, and global energy prices forecast to rise sharply, producer price inflation is expected to stay elevated—which may force producers to pass on higher input prices, ADB 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.

Risks to the outlook are both domestic and external. Domestic risks include the unpredictability of COVID-19 outbreaks and virus mutations, which could endanger the recovery in domestic consumer demand, ADB noted.

Mounting credit risk in the financial system, especially at smaller banks, could trigger a need for policy responses that may induce temporary tensions in the financial market.

External risks include economic spillover effects from the Russian invasion of Ukraine and frictions in global value chains caused by temporary supply shortages or transport bottlenecks, ADB added.

Fibre2Fashion News Desk (DS)