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The World Bank lowered its growth forecast for the Gross Domestic Product of the world’s second largest economy to 2.8%, compared to 8.1% last year. Why?
China is no longer Asia’s growth engine due to its “zero Covid-19” policy to face the worst outbreak of the virus in two years, according to the latest World Bank update.
After decades of vigorous growth in Asia-Pacific, the strict policy to keep Covid-19 at bay and other circumstances will mean that, for the first time since 1990, China will grow below the regional average: 2.8 %, compared to 5.3% regional.
The data was revealed by a World Bank (WB) report, which lowered China’s GDP growth forecast to 2.8 percent, a stark contrast to the 8.1 percent recorded in 2021, and even less optimistic than expected. expected in April, between 4 and 5 percent.
China also lowered the regional expansion for 2022 from a projected 5 percent in April to a current 3.2 percent. Although, excluding China, East Asia, Southeast Asia and the Pacific islands will achieve a growth of 5.3 percent.
In China, everything began to go negative from the second quarter as a result of the strict confinements, such as those ordered by the authorities in the eastern megalopolis of Shanghai, which caused an economic stoppage.
An example of this was the evolution of GDP, which went from growing 4.8% year-on-year in the first quarter to only 0.4% in the second, a contraction of 2.6% in the quarter-on-quarter comparison.
Another factor cited by the World Bank report is the “weakness” of the real estate sector, affected by the limitations imposed by Beijing to try to contain the growing problem of indebtedness of multiple developers, who for years accumulated liabilities by financing via leverage.
The rating agency Moody’s predicts in turn that the low demand could continue throughout the next 12 months.