Top China forecaster sees GDP growth near zero in third quarter

HONG KONG (BLOOMBERG) – China’s tough Covid-19 curbs mean economic activity in the third quarter could be close to flat compared with the previous three months, while full-year growth may fall below 8 per cent, a top forecaster said.

“My view is that the Chinese economy should slow sharply in the third quarter, mainly due to the virus but also controls on property,” said Dr Christophe Barraud, chief economist at Market Securities.

Dr Barraud was Bloomberg’s top-ranked forecaster for the Chinese economy last year. His prediction of 0.3 per cent growth in the July-September period from the previous three months is below the median estimate of 1.1 per cent in a Bloomberg survey of economists.

Dr Barraud is also bearish on China’s growth this year compared with the market’s median estimate of 8.4 per cent.

“It should be close to 8 per cent but with risks tilted to the downside,” he said. “If there is another outbreak in the fourth quarter, forecasts should be adjusted below 8 per cent.”

The government has set a target of above 6 per cent growth for the year.

Dr Barraud’s prediction came after monthly data showed China’s economy slowing sharply last month, with a slump in retail sales and property construction.

China introduced tougher new curbs on travel to squash an imported outbreak of the Delta virus variant from late July. While the measures quickly brought the virus under control, a new cluster has developed in southern China this month, suggesting some restrictions will remain and consumers will continue to be cautious.

“Risks are tilted to the downside because China will keep implementing a zero-tolerance policy concerning Covid-19, particularly ahead of the Winter Olympics in February,” Dr Barraud said.

The France-based economist said one of his favourite indicators of Chinese economic activity at the moment is the daily number of domestic flights.

“It’s the most reliable data to catch the impact of restrictive measures,” he said.

China is scheduled to release third-quarter gross domestic product (GDP) data on Oct 18. In the second quarter, GDP rose 7.9 per cent from the same period last year, and 1.3 per cent from the previous quarter.

Dr Barraud said his forecasting technique involves trying to collect as much data as possible, including from private providers, before constructing a simple model with just five inputs for each predicted economic variable. Those forecasts are adjusted based on experience and comparison with competitors, he said.

For the remainder of the year, infrastructure investment and fiscal spending will be key variables indicating the extent to which Beijing is trying to support growth, he said.

The focus could be more on public investment “because everyone is waiting for public support”, he said.

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