China is on course to miss its economic growth target by 1 percentage point this year amid red hot commodity prices that is fueled by Russia invasion of Ukraine according to Goldman Sachs.
Soaring oil prices also prompted World Bank to slash growth forecasts of big oil importers.
Beijing during the weekend said it would accelerate fiscal spending and aim for growth of “about 5.5%” this year. However, Goldman still remains conservative on forecasts unchanged at 4.5% on the rationale of fueling oil prices, falling housing sales and persistent local COVID-19 outbreaks.
Missing the target would be unusual, as Beijing has reported growth in line or exceeding the bottom range of its gross domestic product (GDP) target every year since 2014.
The official target “imposes some upside risk to our 4.5 per cent projection”, Goldman analysts led by chief China economist Hui Shan wrote in a note.
At the same time, “our commodity team revised up their oil price forecast significantly, which is negative for China growth”.
According to Goldman’s model a $20 increase in oil prices would hurt Chinese growth by 0.3 percentage points implying a 0.5 percentage point drag on GDP growth this year based on oil price forecasts.
The bank said Beijing would need to accelerate policy easing to keep growth from sliding below 4.5 per cent.
