The October-December gross domestic product (GDP) rose 2.9 percent year-on-year, the National Bureau of Statistics of China (NBS) announced on Tuesday. The ratio still beat market expectations for a 0.4% rise in the second quarter and a 1.8% rise in the second quarter.

A sharp slowdown in China’s economy in the fourth quarter due to stringent COVID-19 restrictions has sent growth to its lowest level in nearly half a century in 2022, putting increased pressure on policymakers to introduce more stimulus this year.

Quarterly GDP was 0.0% in the fourth quarter compared to a 3.9% increase in July-September.

Last month Beijing abruptly lifted stringent antivirus measures that severely curtailed economic activity in 2022, but the mitigation has resulted in a surge in COVID cases that economists say could dampen growth in the near term.

In 2022, GDP grew by 3.0%, falling well short of the official target of “around 5.5%” and significantly outpacing 2021 growth of 8.4%. Excluding the 2.2% post-COVID-19 rise in 2020, it is the worst performance since 1976. The last year of the Cultural Revolution was a decade that destroyed the economy.

Reuters poll shows that growth in 2023 will recover to 4.9%. That’s because Chinese leaders are moving to address some of the key factors holding back growth, including a zero-coronavirus policy and a severe slowdown in the real estate sector. Most economists expect growth to accelerate from the second quarter.

Beijing’s abrupt lifting of COVID-19 restrictions last month helped analysts improve economic prospects and spurts in China’s financial markets, but businesses are grappling with the surge in infections, suggesting an uneven recovery in the near term.

Industrial production rose 1.3% year-over-year in December, slowing from a 2.2% increase in November, while retail sales, a key indicator of consumption, declined 1.8% last month, following a 5.9% decline in November.

We believe the market is still under-appreciating the far-reaching ramifications of reopening and the possibility that a decent cyclical recovery can occur despite lingering structural headwinds,” Economists at Morgan Stanley said in a note.

Chinese leaders vowed to prioritize expanding consumption to support domestic demand this year as domestic exporters grapple with the risks of a global recession.

At the agenda-setting meeting in December, senior leaders pledged to focus on stabilizing the economy in 2023 and expanding political support to achieve key goals.

China is likely targeting at least 5% economic growth in 2023 to curb unemployment,” political sources said.

The central bank is expected to gradually ease policy this year, providing more liquidity and lowering the cost of financing businesses, while local governments are likely to issue more debt to finance infrastructure projects.