On December 7th, China surprised friend and foe with a sudden zero-covid turnaround. This year’s forecast has significant upside and downside risks. Still, Rabobank economists believe that in the medium term, China’s economic outlook has become more favorable after abandoning the zero-Covid policy.
A pivotal pivot?
“While in the long term China’s decision to abandon the zero-covid policy is to be announced, the short-term effects are likely to prove grim. The absence of (reliable and up-to-date) data on new cases, hospitalizations, deaths, and many other relevant time series that could shed light on the current situation greatly complicates any attempt at solid impact analyses.”
“We expect a relatively mild recession that started already in the last quarter of last year and should end after the first quarter of this year. Furthermore, we expect most of the recovery to depend on a recovery in aggregate consumption and, more specifically, private consumption. Overall, the Chinese economy is expected to grow by 4.2% this year, but uncertainty around the impact of covid and the property sector ensures that it is likely to be an exciting and challenging year!”