Fitch forecast the general government deficit would rise to 7.1% of gross domestic product (GDP) in 2024 from 5.8% in 2023, the highest since a reading of 8.6% in 2020, when Beijing’s strict Covid curbs weighed heavily on the world’s No.2 economy.

While it lowered its outlook, indicating a downgrade is possible over the medium term, the agency affirmed China’s IDR rating at ‘A+’.

Fitch forecast China’s economic growth would slow to 4.5% in 2024 from 5.2% last year, in contrast to Citi and the International Monetary Fund, which both revised up their China forecasts.

China’s factory output and retail sales topped forecasts in January-February, joining better-than-expected exports and consumer inflation indicators, providing an early boost to Beijing’s hopes of reaching what analysts have described as an ambitious 5.0% gross domestic product growth target for 2024.

“The outlook revision reflects increasing risks to China’s public finance outlook as the country contends with more uncertain economic prospects amid a transition away from property-reliant growth to what the government views as a more sustainable growth model,” Fitch said.

China’s finance ministry said following the announcement it regretted Fitch’s ratings decision.

Moody’s in December slapped a downgrade warning on China’s credit rating, citing the costs to bail out local governments and state firms and control its property crisis.