China’s second-largest economy is facing growing turbulence as it struggles with a slowdown in its property market and persistently weak confidence. As a result, the Asian nation’s economic growth is expected to slow in the third and fourth quarters, according to Goldman Sachs (GS.N). According to a note published late Sunday, the Wall Street investment bank has lowered its full-year accurate gross domestic product growth forecast for the world’s second-biggest economy from 6% to 5.4%. It also lowered its 2024 growth forecast from 4.6% to 4.5%.

Despite the lower outlook, Goldman expects further policy support from Beijing as it works to ease the property slowdown, which is hurting economic activity. The bank said the government was likely to continue to ease property rules in top-tier cities by lowering down-payment requirements and easing mortgage interest rates, among other measures. It is also expected to reduce restrictions on high-end manufacturing, which the cooling market has hit.

However, Goldman believes China’s efforts will be “limited” in scale and duration compared with the stimulus measures adopted during past downturns. It says Beijing will struggle to reverse the slowdown in property markets without an economy-wide recession. “Past housing downturns were accompanied by economic-wide recessions, driving an influx of new supply and reducing house prices,” the note said.

Investors anticipate that the state council, China’s cabinet, may unveil new stimulus measures at a meeting scheduled for Friday. Recently, the government has cut key interest rates and loosened lending rules to boost growth.

Economists at Goldman say that while these measures are expected to have some impact, they are unlikely to be enough to offset the effect of a slowdown in the property sector. They add that the Chinese economy could slip into recession as early as the first half of 2023, a scenario that would be “catastrophic” for the country.

As China grapples with slowing growth, its currency is becoming increasingly volatile and has risen above its trading range. As a result, the country is struggling with a substantial current account deficit, exacerbated by the global slowdown and falling commodity prices. The country is also trying to contain its debt problem, with accumulating public and private debt creating a risk of financial distress.

As a result, China is stepping up its purchases of foreign assets, and the central bank has been allowing banks to lend at higher rates to help ease liquidity. This has helped to stabilize the country’s stock market. However, the slowdown in the property market is weighing on overall economic growth, which will limit its export potential and further weigh on import demand. The Chinese economy has a strong influence on the global economy. It is an essential driver of global markets, so changes in its economic performance will have far-reaching implications for investors across the globe.

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