China’s budget deficit could exceed 3.5% of GDP in 2024

China is likely to estimate its budget deficit at 3.5% of GDP or higher in 2024, according to many economists who noted that the latest extraordinary mid-year budget review predicts more financial support in the future.

UBS Group, China International Capital Corporation, and Kayuan Securities are all expecting the government to raise the deficit ratio to over 3% of GDP in 2024.

Beijing has previously tried to maintain its budget deficit ratio at this level or below, but last month raised it to 3.8% in 2023 as part of efforts to support the economy.

“The recent budget review “may indicate a variable approach to fiscal policy,” Wang Tao, China’s senior economist at UPS, wrote in a research note, adding that she expects the government to set the budget deficit at 3.5%–3.8% in 2024. With the housing and export markets expected to continue to weaken next year, increased budget spending would support economic growth.

Economists Zhang Wenlang and Peng Wencheng at China International Capital Corporation also expect to set the budget deficit at 3.5%–3.8% of GDP next year.

They also expected that more deficit funding would be directed towards areas such as social security, science, and education.

“The deficit could rise to between 3.5% and 4% of GDP,” He Ning, an analyst with Kayuan Securities, wrote in a research note this week.

China’s main deficit refers to the gap between revenue and expenditure recorded in China’s general budget, which mostly covers daily spending.