Several major banks have cut their 2023 gross domestic product (GDP) growth forecasts for China after May data showed a post-COVID recovery was faltering in the world’s second-largest economy.

Nomura has cut its forecast for China’s 2023 GDP growth to 5.1 per cent from 5.5 per cent, the Japanese bank said in a note, following similar moves by UBS, Standard Chartered, Bank of America (BoA) and JPMorgan.

The banks now expect China’s GDP growth to be between 5.1 per cent and 5.7 per cent this year, down from an earlier range of 5.5 per cent to 6.3 per cent.

Data on Thursday showed China’s economy stumbled in May with industrial output and retail sales growth missing forecasts, adding to expectations that Beijing will need to do more to shore up a shaky post-pandemic recovery.

The government has set a modest GDP growth target of around 5 per cent for this year after badly missing its 2022 goal.

UBS economists on Friday cut their GDP forecast to 5.2 per cent from 5.7 per cent and said in a note that they expected more policy support to come.

China’s central bank on Thursday cut the interest rate on its one-year medium-term lending facility, the first such easing in 10 months, paving the way for cuts in the benchmark loan prime rates (LPR) next week.

Economists at Standard Chartered lowered their 2023 growth forecast to 5.4 per cent from 5.8 per cent previously.

“Additional stimulus likely to be measured, as China prioritises improving business climate and confidence,” the economists said in a note.

Standard Chartered lowered its forecast for China’s second-quarter growth to 5.8 per cent from 7 per cent.

The April-June growth is widely expected to be boosted by a low base of comparison given there were widespread COVID-19 lockdowns a year earlier.

BofA downgraded its 2023 GDP growth forecast to 5.7 per cent from 6.3 per cent, while JPMorgan had earlier trimmed its outlook to 5.5 per cent from 5.9 per cent.

China will roll out more stimulus to support a slowing economy this year, but authorities are likely to focus on shoring up weak demand in the consumer and private sectors, sources involved in policy discussions said.

Nomura has also cut its forecast for China’s 2024 growth to 3.9 per cent from 4.2 per cent, while BofA cut its outlook to 5.0 per cent from 5.2 per cent.

Meanwhile China’s cabinet met on Friday to discuss measures to spur growth in the economy, state media reported, pledging to roll out policy steps in a timely way amid signs that a post-COVID recovery is fading.

“We must take more effective measures to enhance the momentum of development, optimise the economic structure and promote the sustained recovery of the economy,” state media said, citing a regular cabinet meeting chaired by Premier Li Qiang.

Officials at the meeting pledged to roll out policies in a timely manner when the conditions are right and to take more forceful measures in response to changes in the economic situation, the report said.

While economic growth beat expectations in the first quarter, analysts are now downgrading their forecasts for the rest of the year, as factory output slows amid weak external and domestic demand.

“A slowdown in global trade and investment has had a direct impact on China’s economic recovery,” the report added.

Several major banks have cut their 2023 gross domestic product (GDP) growth forecasts for China after May industrial output and retail sales data missed forecasts and indicated that Beijing will need to do more to shore up a shaky post-pandemic recovery.

The government has set a modest GDP growth target of about 5 per cent for this year after badly missing its 2022 goal.

The meeting also passed plans to step up financing support for technology companies and draft rules for supervising private funds.

Sources involved in policy discussions told Reuters that China will roll out more stimulus measures to support the economy, but concerns over debt and capital flight will keep measures aimed at shoring up weak demand in the consumer and private sectors.

On Friday, policymakers agreed to introduce measures to expedite the introduction of specific policies to promote the development of venture capital funds, provide more support to technology startups and to introduce measures against illegal financing, state media said.

China’s foreign direct investment in January-May rose 0.1 per cent from a year earlier to 574.81 billion yuan ($80.34 billion), the commerce ministry said.