China’s economic growth is expected to fall below the government’s 6 per cent target in 2018 and 2019, according to Fitch, reflecting the increasing challenge of supporting growth given a higher level of indebtedness.
The ratings agency, in its regular Global Economic Outlook report forecast growth in China of 5.9 per cent in 2019 and 5.8 per cent the year after. The economy is expected to grow 6.5 per cent this year.
Fitch noted tighter credit conditions as authorities clamp down on the growth of leverage in the financial system. The agency said new credit as a share of GDP has already “slowed sharply”, suggesting a slowdown in housing sales ahead. “Housing is the key cyclical sector in the economy and will weigh on growth in 2018 along with a likely slowdown in infrastructure development,” Fitch said.
Fitch pointed out that its growth forecasts for China and Japan in 2017 and 2018 had been revised up by 0.2 percentage points since its March GEO report. Japanese growth is forecast to be 1.2 per cent this year, slowing to 1.1 per cent in 2018 and 0.7 per cent the year after. The agency said “the recent flow of hard data suggests that Japan’s growth momentum has continued to build in the first half of this year”.
Globally, Fitch forecasts GDP growth of 2.9 per cent in 2017, up 0.4 percentage points from last year, and rising to 3.1 per cent in 2018 before easing to 3 per cent in 2019. The US looks to be a key driver of growth globally and in the developed world in 2018.