According to a Reuters poll, China’s economic growth would likely fall to 5.0 percent in 2022 due to further COVID-19 outbreaks and a faltering global recovery, putting more pressure on the central bank to loosen policies further.

The projected growth rate for 2022 is lower than the 5.2 percent predicted by economists in a Reuters poll in January, implying that the government will have a difficult time meeting this year’s 5.5 percent target. After that, growth is expected to accelerate to 5.2 percent in 2023.

Gross domestic product (GDP) likely grew 4.4 percent in the first quarter from a year earlier, according to the median forecasts of 41 economists polled by Reuters, outpacing the fourth-quarter’s 4.0 percent due to a solid start in the first two months.

Analysts believe March activity could take a blow from China’s efforts to contain its biggest COVID outbreak since the coronavirus was first discovered in the city of Wuhan in late 2019.

“March activity data is likely to have seen a notable deterioration, but that would just be the tip of the iceberg as the economically damaging lockdowns only started in mid-March,” analysts at Societe Generale said in a note.

“However, real GDP growth might avoid falling below 4 percent, thanks to the infrastructure push, the reporting methods and the
surprisingly strong data seen in January and February.”

On a quarterly basis, growth is forecast to fall to 0.6 percent in the first quarter from 1.6 percent in October-December, the poll
showed.

The government is due to release first-quarter GDP data, along with March activity data, on April 18, at 0200 GMT.

GDP expanded 8.1 percent in 2021, its best showing in a decade, but momentum cooled markedly over the course of last year, weighed by debt problems in the property market and anti-virus measures that hit consumer confidence and spending.

Last year, policymakers focused on curbing property and debt risks, which exacerbated the economic slowdown.

More easing on cards

The government has unveiled more fiscal stimulus this year, including stepping up local bond issuance to fund infrastructure
projects, and cutting taxes for businesses.

China will use timely cuts in banks’ reserve requirement ratios (RRR) and other policy tools to support the economy, the cabinet said on Wednesday, as headwinds increase amid outbreaks of COVID-19.

The People’s Bank of China (PBOC) is likely to cut the RRR — the amount of cash that banks must hold as reserves — by 50 basis points (bps) in the second quarter of 2022, according to the poll.

Citi economists expect a 50-basis point cut to be announced as early as Friday, releasing over 1.2 trillion yuan ($188.52 billion) in liquidity, they said in a note, adding the move could reduce the chance for an imminent medium-term lending facility rate cut, but the loan prime rate (LPR) could still be trimmed on April 20.

Analysts expect the PBOC to cut the one-year LPR, thebenchmark lending rate, by 10 basis points in the second quarter, the poll showed.

The PBOC last cut the one-year LPR by 10 basis points in January and last cut the RRR by 50 basis points in December.

Consumer inflation is expected quicken to 2.2 percent in 2022 from 0.9 percent in 2021, before picking up to 2.3 percent in 2023, the poll showed.