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Goldman Sachs cuts China’s GDP forecast due to Omicron

Goldman Sachs expects that the spread of Omicron and restrictions caused by the zero-covid policy will slow down China’s economic growth even more. China’s 2022 year GDP growth forecast is now set at 4.3% compared to 4.8% earlier, according to the company’s economists. “In light of the latest Covid developments – in particular, the likely higher average level of restriction (and thus economic cost) to contain the more infectious Omicron variant – we are revising down our 2022 growth forecast to 4.3%,” Goldman Sachs analysts said in a report. With Omicron cases spreading through China cities, the authorities are prompting partial lockdowns that lead to some business closures in such areas. Consumption is expected to be affected the most, while export activities will remain more stable. Q1 is likely to be the most dramatic, the analysts believe, with the situation improving after Winter Olympic Games when COVID-19 restrictions and production cuts are eased. Goldman Sachs expects that China may turn to policy-driven public investments as well as monetary and fiscal easing to spur economic growth. The forecast of 4.3% is much below the 5.2% median projection of the Bloomberg survey of economists. Last year’s figure will most probably be at 8%, but the official data will be released next week.

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