(Bloomberg) -- China’s annual growth target looks increasingly out of reach to economists, with UBS Group AG adding to a string of recent forecast cuts as consumer spending slows and Xi Jinping’s government avoids major stimulus.

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The bank now expects China’s gross domestic product to expand 4.6% this year, down from an earlier forecast of 4.9%, with economic momentum remaining subdued amid the real estate downturn and a tight fiscal policy stance. For next year, UBS sees growth at 4%, down from 4.6% previously.

The downgrade, coming after weak earnings reports from several top Chinese consumer companies this month, highlights worries that the country might not meet its growth target of around 5% this year. The real estate downturn has weighed heavily on domestic demand and confidence. China last missed its annual growth target in 2022, when Covid lockdowns and abrupt policy changes put that goal out of reach.

“We expect weaker property activities to have a bigger drag on the overall economy than earlier expected, including through household consumption,” UBS economists including Wang Tao wrote in a note Wednesday.

Many analysts have slashed their growth projections for China’s economy after it slowed to its weakest pace in five quarters from April to June. Other banks skeptical about Beijing achieving its growth target include JPMorgan Chase & Co. — which also predicts a 4.6% increase — and Nomura Holdings Inc., which forecasts an even lower 4.5%.

A Bloomberg survey in August shows economists lowering their growth forecasts for the third and fourth quarters to 4.6% from 4.7% in the previous poll.

Despite China easing its policies toward the property market since the end of 2022 — including reduced down-payment requirements, lower mortgage rates and fewer restrictions on home purchases — the implementation of the measures has been slow, with limited impact, according to UBS.

“China’s property demand and supply fundamentals have changed in recent years, market confidence is low amid weak household income growth, and inventory levels are high while destocking implementation has been slow,” the economists wrote. The bank downgraded its outlook for China’s property sector, and now expects a bottoming out of new starts only in mid-2026.

China’s housing slump has shown little sign of reversing. New-home sales fell almost 20% in July from a year earlier, while first-hand home prices dropped at their fastest pace on a year-on-year basis in nine years. New home starts also continued to plunge at a clip of around 20%. The crisis has dragged down everything from the job market to consumption and household wealth over the past two years.

The economic difficulties have contributed to a prolonged rout in the world’s second-largest stock market, despite various efforts by authorities to restore investor confidence. The CSI 300 Index, which tracks onshore Chinese equities, has fallen 4.2% in 2024 and is on track for an unprecedented fourth consecutive annual loss. In contrast, a broader index of Asian shares has risen nearly 10%.

Highlighting the hit to individual investors, nearly half of the 27 closed-end, three-year mutual funds launched in 2021 are facing losses of at least 40% as they near the end of their cycle, according to a report by the state-run China Securities Journal on Thursday.

The ongoing decline in real estate underscores the waning impact of the rescue package unveiled in May. At least 10 city governments have loosened or scrapped new-home price guidelines to let market demand play a bigger role. This is likely to lead more real estate companies to cut prices, as they adjust to the sharper declines seen in the second-hand market.

China has been considering a proposal to allow local governments fund their purchases of unsold homes via special bonds — a new financing option to prop up the market, Bloomberg reported last week. The country has 382 million square meters of unsold new homes as of July, roughly the size of Detroit, according to the latest official data.

Wang Yan, a strategist at Alpine Macro who recently returned from a trip to China, described the government’s 5% growth target as “almost impossible” to achieve and warned of potential risks of “a slow implosion” ahead.

He noted that policymakers lack a clear and coherent strategy to tackle the challenges, and descirbed even the “piecemeal measures” being implemented to address demand issues as ad-hoc and hesitant.

--With assistance from Shikhar Balwani and Lulu Yilun Chen.

(Updates with details, background throughout)

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