MANILA, PHILIPPINES (6 April 2022) — Economic growth in the People’s Republic of China (PRC) will slow this year and in 2023, after recovering in 2021, as domestic demand remains lackluster despite continued export strength and increased fiscal support, according to a new report by the Asian Development Bank (ADB).

The PRC’s economy is forecast to grow 5.0% in 2022 and 4.8% in 2023, as the labor force shrinks and return to investment declines, according to the Asian Development Outlook (ADO) 2022 released today. The outlook for 2022 compares with ADB’s previous forecast of 5.3% growth, issued in December 2021.

“Economic growth is expected to remain moderate in early 2022 before picking up slightly in the middle of the year,” said ADB Country Director for the PRC Yolanda Fernandez Lommen. “Reforming fiscal relations between the central government and local governments is key to narrowing the local government fiscal gap and equalizing the delivery of basic public services across regions.”

Following modest food price deflation last year, inflation is projected to pick up in line with higher nonfood prices, before easing marginally in 2023. Consumer price inflation is forecast at 2.3% this year, notably higher than the 0.9% inflation rate in 2021. With commodity price pressures unlikely to subside in 2022, and global energy prices forecast to rise sharply, producer price inflation is expected to stay elevated—which may force producers to pass on higher input prices.

Domestic demand is expected to improve gradually this year. The persistence of coronavirus disease (COVID-19) infections continues to weigh on consumer confidence and dampen growth in household demand. Investment looks set to improve in 2022. Real estate investment will likely pick up, with borrowing curbs on the sector sustained but adjusted to facilitate market stabilization and gradual recovery.

Risks to the outlook are both domestic and external. Domestic risks include the unpredictability of COVID-19 outbreaks and virus mutations, which could endanger the recovery in domestic consumer demand. Mounting credit risk in the financial system, especially at smaller banks, could trigger a need for policy responses that may induce temporary tensions in the financial market. External risks include economic spillover effects from the Russian invasion of Ukraine and frictions in global value chains caused by temporary supply shortages or transport bottlenecks.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

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