Financial ratings agency Fitch Ratings has lowered its estimate of China's low 2022 growth to 2.8%, in light of the impact of Covid-19 prevention measures and weakness in the real estate sector.

Fitch's analysis "reflects a larger-than-expected decline in China's GDP [gross domestic product] [growth]" in 2022 in the face of a "sharper and longer" contraction in the housing market and the "deterioration of the global outlook," reads the Global Economic Outlook report, published Thursday by the agency.

The figure is far below the official target outlined by Beijing, of "about 5%," and 0.9% below the last forecast made by the agency.

In the second quarter of the year, the Chinese economy contracted by 2.6%, compared to the previous quarter, and achieved a homologous increase of 0.5%.

Between March and June, the isolation of Shanghai, the country's financial "capital," and of important industrial cities like Changchun and Guangzhou, had a strong impact on the country's service, manufacturing, and logistics sectors.

Economic activity rebounded in June after the Shanghai deconfinement, but momentum fell sharply in July, with retail sales, fixed asset investment and industrial production exhibiting higher-than-expected decelerations, the agency noted.

"We've had a perfect storm for the global economy in recent months, with the gas crisis in Europe, a sharp acceleration in interest rate increases, and an ever-worsening housing market slump in China," described Brian Coulton, chief economist at Fitch Ratings.

The Asian country's real estate sector is experiencing a longer-than-expected contraction, according to the agency. For the first seven months of the year as a whole, sales fell 27%, year-on-year. New housing construction fell 37%.

Investment in real estate accounts for about 14% of China's GDP.

Last year, Chinese regulators began requiring construction companies to cap liabilities to assets ratio at 70% and limit net debt to assets to 100%, sparking a liquidity crisis in the sector, which was exacerbated by Covid-19 countermeasures.

The lack of liquidity among builders has led to delays or stoppages in the construction of apartments sold before completion. Thousands of buyers are refusing to continue paying the installment of the property.

"These are by far the worst numbers since the private property market was established in China and are showing no signs of recovery," reads the note from Fitch Ratings.

The agency also revised China's growth forecast for 2023, to 4.5%, down 0.8% from the previous analysis. (Lusa)