China’s gross domestic product (GDP) expanded by just 3% in 2022, a level well below the official target of 5.5% and one of the slowest growth rates recorded in almost half a century.
The data published on January 17 by China’s National Bureau of Statistics shows how strict Covid-19 policies have weighed on Asia’s largest economy. The growth rate of 3% in 2022 was the lowest level — excluding the first year of the Covid-19 pandemic — since China began to reform its economy in 1978.
Demographic data showed that China’s population declined for the first time in 60 years, falling by about 850,000 people to 1.41 billion as of the end of 2022.
Beijing’s scrapping of its draconian zero-Covid measures had boosted expectations of an economic revival this year, but a sharp rise in Covid-19 cases, along with property market woes and social unrest, are leading to continued wariness among some foreign investors in China.
Infrastructure set to drive FDI in Middle East
The Middle East is forecast to have a record year of foreign direct investment (FDI) inflows in 2023, as corporates and funds seek to set up and play a role in large infrastructure projects in the region, according to a report published on January 10 by Lumina Capital Advisors.
The advisory firm, which focuses on transactions between the UK and Middle East, said that “regional presence for aspiring global firms is now seen as a must, rather than a nice-to-have”. It noted that seven mega infrastructure projects in Saudi Arabia, which includes the high tech desert city of Neom and tourism-focused Red Sea Project, will cost $690bn to build.
Major economies from the Middle East and north Africa region, including Qatar, Oman and Saudi Arabia, are expected to carry the strongest investment potential into 2023, according to FDI Standouts Watchlist 2023.
Bank of England warns of ‘Truss effect’ hangover
Foreign portfolio investors are still wary about lending money to the UK government, which is a “hangover” from former prime minister Liz Truss’s time in office, the Bank of England’s governor has said.
Andrew Bailey told members of parliament at a Treasury Select Committee hearing on 16 January that the cost of government borrowing, which soared after Ms Truss’s tax-cutting ‘mini-Budget’, has normalised, but that “it’s going to take some time to convince everybody that we’re back to where we were before.”
On September 23 2022, the former UK chancellor of the exchequer, Kwasi Kwarteng, unveiled a ‘Growth Plan’ with a series of supply side reforms, which included the scrapping of the rise in corporation tax, cuts to income tax and the establishment of investment zones. An IMF spokesperson criticised the UK’s fiscal policy at the time, saying it would “likely increase inequality”.
The pound has struggled to regain ground on other currencies since last September’s turbulence, when the Bank of England had to step in to calm financial markets.