GGRAsia – Fitch ups China 2023 GDP forecast, leisure demand a factor

Fitch ups China 2023 GDP forecast, leisure demand a factor

Mar 13, 2023 Newsdesk Latest News, Macau, Top of the deck

Credit agency Fitch Ratings Inc has raised the forecast for China’s gross domestic product (GDP) growth this year to 5.2 percent, from a 4.1-percent estimate in December. China discontinued most of its Covid-19 restrictions in early January, which coincided with an uptick in the volume of mainland tourists to Macau. The city (pictured) is the only place in China where casino gambling is legal.

Fitch’s revised outlook for China had “a major direct impact” on the institution’s world GDP growth forecast, given that “China accounts for 1.2 percentage points, 60 percent, of our 2.0 percent global growth forecast for 2023,” said the ‘Global Economic Outlook – March 2023’ report from Brian Coulton, chief economist at Fitch Ratings, and his colleague Pawel Borowski.

Commenting specifically on China, the analysts observed: “Hard economic data for January and February are still scarce, but high-frequency mobility indicators, PMI [purchasing manager index] surveys and anecdotal reports all suggest a rapid rebound is under way in activity and spending.”

This included suggestions of a “jump in spending on ‘contact-intensive’ services, such as restaurants, entertainment, travel and accommodation.”

The Fitch report also indicated the current recovery was likely to be moderated by “ongoing weakness in the property sector” in China, and “a slowdown in external demand”.

The document added that a recent official 2023 GDP growth target for China of “‘around 5 percent’” suggests that “aggressive macro stimulus measures are unlikely”.

Fitch said that China’s exports contracted at end-2022 and, “despite our upgrades to U.S. and European growth, we anticipate that net trade will become a drag on China’s growth this year as global demand for Chinese-produced goods eases and services imports pick up”.

Nonetheless the ratings agency said that an initial surge in Covid-19 cases in the aftermath of eased restrictions “seems to have had only a brief impact on activity”. The institution is now expecting “a 1.4 percent quarter-on-quarter expansion in GDP in first quarter 2023”.

But Fitch said that for the Chinese economy, what it termed the “credit impulse” had “faded in late 2022 and although credit growth picked up somewhat in February, we do not expect a sharp revival in credit growth”.

The analysts said that although Fitch considered China’s post-pandemic rebound, “a one-off,” it was nonetheless helping to boost aggregate emerging-market growth to 3.9 percent this year from 3.2 percent in 2022.

Mainland China is the most important source market for Macau’s tourists. The full reopening of borders between the mainland, Macau and Hong Kong had been touted by investment analysts as an important step to help boost tourism to Macau, and support the recovery of the city’s gaming industry. Prior to the Covid-19 pandemic, many mainland tourists travelling to Hong Kong would also visit Macau.

Macau’s GDP could soar by up to 44.1 percent this year, according to the ‘Macroeconomic Forecast for Macao 2023′, published by the University of Macau (UM). Such sharp increase would be linked to a strong rebound in the city’s tourism and casino sectors, according to the research. The city’s GDP decreased by 26.8 percent year-on-year in real terms in 2022, showed official data.