(Bloomberg) -- China is on course to miss its economic growth target by 1 percentage point this year as higher oil prices weigh on the world’s second-largest economy, Goldman Sachs Group Inc. said.

Beijing said at the weekend it would accelerate fiscal spending and aim for growth of “about 5.5%,” this year. But Goldman analysts kept their forecast unchanged at 4.5%, citing headwinds to the economy from oil, falling housing sales and persistent local coronavirus outbreaks. 

Missing the target would be unusual, as Beijing has reported growth in line or exceeding the bottom range of its gross domestic product target every year since 2014.

The official target “imposes some upside risk to our 4.5% projection,” Goldman analysts led by chief China economist Hui Shan wrote in a note. At the same time, “our commodity team revised up their oil price forecast significantly, which is negative for China growth.” 

Goldman estimates that a $20 per barrel increase in oil prices reduces Chinese growth by 0.3 percentage points, implying a 0.5 percentage point drag on GDP growth this year based on a forecast for oil prices. The bank said Beijing would need to accelerate policy easing to keep growth from sliding below 4.5%.

“Higher oil prices would lower real household/corporate income and weigh on consumption and investment activities. But given the importance of economic growth to labor market stability and financial stability, especially in a politically important year, we think the government is unlikely to let this year’s GDP growth to slide further below 4.5% this year,” the bank said.

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