Fitch Raises China’s 2023 Growth Forecast to 5%

A report from chinadaily.com.cn on Feb. 10th, 2023:

Fitch Ratings said on Wednesday it has revised its forecast for China’s economic growth in 2023 to 5 percent, up from 4.1 percent previously.

The forecast upgrade shows that consumption and activity are recovering faster than the credit rating agency initially anticipated after the Chinese authorities moved away from their dynamic zero-COVID policy stance in late 2022.

Many high-frequency indicators have recently rebounded in sequential terms. The official nonmanufacturing PMI jumped to 54.4 in January from 41.6 in December, for example.

The swift rebound from the COVID-19 shock wave means that activity in the first half of 2023 will be stronger than Fitch Ratings had forecast.

The economic recovery will be primarily consumption-led, as households re-engage in activities previously hampered by health controls, said the credit rating agency.

The sharp acceleration in household deposit growth recorded over 2022 could support even faster “catch-up” consumption than Fitch Ratings now anticipates.

However, its analysts said they believe abnormally high deposits from 2022 will not be deployed exclusively toward consumption, as the deposits also reflect a reallocation of assets away from property and other investments that may revert in 2023.