BOC Research Institute released the 2022Q4 Economic and Financial Outlook (the “Report”) in Beijing on September 28, 2022. The Report reviews the global and China’s economic and financial performance as well as the global banking performance in 2022Q3. It also provides an outlook on the economic and financial situations and the global banking trends in 2022Q4.
In terms of the global economy and finance, the Report notes that in the first three quarters of 2022, the global economic growth moderated from quarter to quarter amid mounting downward pressure from the perspective of geographical distribution, cyclical evolution and supply-demand structure. As the US Dollar Index (DXY) exceeded the 110 mark, many countries showed an inversion of yields on long-term and short-term government bonds and some emerging economies suffered a rising sovereign debt risk. Looking ahead, with the tightening of monetary policy and the contraction in demand, the global economy will gradually approach the tipping point of a recession under growing downside pressure. International financial markets will remain volatile as global interest rates are generally trending upward, along with the tightening offshore liquidity of US dollar and euro. The Report also provides a special analysis on hot issues such as the global trend of green transition amid the energy crisis and whether emerging markets will undergo another wave of currency crises.
As for China’s economic and financial situation, the Report notes China’s economy continued to recover in 2022Q3 as its COVID-19 policy got improved, the pro-growth policy worked persistently and the mild inflation gave elbow room for flexible macro policy operations, coupled with strong exports. However, China’s economy recovery missed expectations due to weaker domestic demand amid coronavirus resurgence, heatwaves and droughts and property market crunch. China’s GDP is expected to have grown by around 3.8% in Q3, a rally of about 3.4 percentage points from Q2. Looking forward to Q4, China’s exports may weaken and the fallout from COVID-19 will still persist in the country. The recovery of domestic demand depends on the sustained effect of the pro-growth policy and improvement in the COVID-19 policy. GDP growth is projected to be about 5% for Q4, and approximately 3.5% for the year. The pro-growth policy should focus on stabilizing domestic demand and expectations, seeking to strike a balance between stable growth and fiscal sustainability.
With regard to global banking developments, the Report notes that the global banking sector will see uncertainties hovering through 2022Q4, with prominent risks and emerging NPL pressure detrimental to earnings growth, capital adequacy enhancement and balance sheet expansion. China’s macroeconomic outlook is upbeat overall in 2022Q4. The Chinese banking sector, encouraged by policymakers to boost support for the real economy, will continue to expand their balance sheets and ratchet up their earnings while maintaining good quality of assets and adequate capital. With the ongoing global transition to a new development paradigm, both economic and financial fronts still face numerous challenges in 2022, giving rise to new trends in banking operations. International operation and digital inclusive finance are worth noting.
