China’s economy likely expanded at the weakest rate in 1-1/2 years in the fourth quarter, driven down by weakening demand owing to a housing slowdown, debt limits, and tough COVID-19 measures, putting pressure on officials to ease further.
According to a Reuters survey, gross domestic product (GDP) rose 3.6 percent year on year in October-December, the slowest rate since the second quarter of 2020 and down from 4.9 percent in the third quarter.
Growth is expected to increase to 1.1 percent in the fourth quarter, up from 0.2 percent in July-September.
For 2021, GDP likely expanded 8.0%, which would be the highest annual growth in a decade, partly due to the low base set in 2020, when the economy was jolted by COVID-19 and stringent lockdowns.
The government is due to release the GDP data, along with December activity data, on Monday at 0200 GMT.
The world’s second-largest economy, which cooled over the course of last year, faces multiple headwinds in 2022, including persistent property weakness and a fresh challenge from the recent local spread of the highly-contagious Omicron variant.
Exports, which were one of the few areas of strength in 2021, are also expected to slow, while the government is seen continuing its clampdown on industrial emissions.
Policymakers have vowed to head off a sharper slowdown, ahead of a key Communist Party Congress late this year.
The central bank is set to unveil more easing steps, though it will likely favor injecting more cash into the economy rather than cutting interest rates too aggressively, policy insiders and economists said.
Analysts polled by Reuters expect the central bank to deliver more modest easing steps, including cutting banks’ reserve requirement ratios the one-year loan prime rate (LPR) – the benchmark lending rate.
Analysts at ANZ said in a note that they saw a possibility that the central bank will cut the rate on its medium-term lending facility (MLF) on Monday.
Policymakers have also pledged to step up fiscal support for the economy, speeding up local government special bond issuance to spur infrastructure investment and planning more tax cuts.
“We might see a larger effect of the monetary and fiscal easing only in the second half of 2022 due to the transmission lags of these policies,” analysts at Natixis said in a note.
“The recent monetary easing and the stabilization of PMI (factory activity) have indicated such a direction, but more efforts are needed to boost fixed asset investment.”
Growth is likely to slow to 5.2% in 2022, according to the poll.