BEIJING – Ratings agency Fitch revised its outlook on China’s sovereign credit rating to negative on Tuesday, citing risks to public finances as the economy faced increasing uncertainty in its shift to new growth models.
Fitch forecast the general government deficit would rise to 7.1% of gross domestic product (GDP) in 2024 from 5.8% in 2023, the highest since a reading of 8.6% in 2020, when Beijing’s strict COVID curbs weighed heavily on the world’s No.2 economy.
While it lowered its outlook, indicating a downgrade is possible over the medium term, the agency affirmed China’s IDR rating at ‘A+’.
Fitch forecast China’s economic growth would slow to 4.5% in 2024 from 5.2% last year, in contrast to Citi and the International Monetary Fund, which both revised up their China forecasts.
China’s factory output and retail sales topped forecasts in January-February, joining better-than-expected exports and consumer inflation indicators, providing an early boost to Beijing’s hopes of reaching what analysts have described as an ambitious 5.0% gross domestic product growth target for 2024.
“The outlook revision reflects increasing risks to China’s public finance outlook as the country contends with more uncertain economic prospects amid a transition away from property-reliant growth to what the government views as a more sustainable growth model,” Fitch said.
China’s finance ministry said following the announcement it regretted Fitch’s ratings decision.
Moody’s in December slapped a downgrade warning on China’s credit rating, citing the costs to bail out local governments and state firms and control its property crisis. – Reuters