(Yicai Global) March 1 -- The Chinese government is likely to set the economic growth target for 2023 at around 5 percent, and the fiscal deficit ratio could be brought back up to 3 percent, Yicai Global learned from interviews with economists in the run-up to the annual meeting of the country’s top legislative body in Beijing later this month.

The National People’s Congress, which will convene from March 5 to March 11 to lay out the agenda for the country’s economy this year, will set the gross domestic product expansion target for 2023 at above 5 percent, said Gao Ruidong, chief macro economist at Everbright Securities.

Actual economic growth has been below potential since the start of the Covid-19 outbreak, he added. By setting a goal above 5 percent, it will boost market confidence, improve economic prospects and ease employment pressure.

And the central government may consider slightly increasing the fiscal deficit ratio to 3.1 percent in 2023, close to the level in 2021, Gao said. This would produce a deficit of over CNY4 trillion (USD579.5 billion), bearing in mind that fiscal revenue and spending will remain imbalanced this year.

An expectation for around 5 percent economic growth is realistic, said Lu Ting, chief China economist at Japanese brokerage Nomura.

China’s gross domestic product maintained an average compound annual growth rate of 5.1 percent during the pandemic-hit years of 2020 and 2021, Zhao Wei, chief economist at Sinolink Securities, told Yicai Global. But setting this year's economic growth goal at about 5 percent is reasonable in light of negative factors such as a possible slump in exports.

The central government should continue to adopt an expansionary fiscal policy this year, and increase the deficit rate to 3 percent from last year’s 2.8 percent while stepping up the direct allocation of payments to local governments, said Zhu Baoliang, chief economist of the State Information Center.

The NPC usually sets a fiscal deficit ratio of less than 3 percent every year. The ratio however reached a historic high of 3.7 percent in 2020 to deal with Covid-19, before falling back to 3.2 percent in 2021 and 2.8 percent last year.

Key Tasks

Among the various challenges facing the government this year, the most urgent one is how to restore market confidence in the economy through the introduction of policies, Lu said. This is crucial in order to realize economic recovery in the years to come, not just this year.

For the government, the most important task this year is building confidence among the international community and local market players by rolling out a series of supportive policies, he added.

The country holds the Two Sessions, an annual meeting of the National People's Congress and the National Committee of the Chinese People’s Political Consultative Conference, in early March every year. During the Two Sessions, members of the National Committee of the CPPCC can make proposals on different issues to the government. Government agencies must respond to the proposals within six months.

Editors: Tang Shihua, Kim Taylor