Aerial view shows residential buildings under construction in Hangzhou, China on March 15, 2024.
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Ratings agency Fitch revised its outlook on China’s sovereign credit rating to negative on Tuesday, citing risks to public finances as the economy faces growing uncertainty as it transitions to new growth patterns.
Fitch forecasts that the government deficit will rise to 7.1% of gross domestic product (GDP) in 2024 from 5.8% in 2023, the highest level since 8.6% in 2020, when the strict anti-Covid measures of Beijing weighed heavily on the second largest country in the world. economy.
While it lowered its outlook, indicating that a downgrade is possible in the medium term, the agency affirmed China’s IDR rating at ‘A+’.
Fitch expects China’s economic growth to slow to 4.5% in 2024 from 5.2% last year, unlike Citi and the International Monetary Fund, which both revised up their forecasts for China.
China’s industrial production and retail sales beat forecasts in January-February, combining with better-than-expected exports and consumer inflation indicators, providing an early boost to Beijing’s hopes of achieving what analysts have described as an ambitious gross domestic product growth target of 5.0% for 2024. .
“The outlook revision reflects growing risks to China’s public finance outlook as the country faces a more uncertain economic outlook amid a transition from real estate-led growth to what the government views as a more sustainable growth model ” Fitch said.
China’s Ministry of Finance said after the announcement that it regretted Fitch’s rating decision.
Moody’s issued a downgrade warning on China’s credit rating in December, citing the costs of bailing out local governments and state-owned enterprises and controlling the property crisis.