China’s better-than-expected first quarter economic growth has spurred some investment banks to raise their growth forecasts for this year. Economists at Barclays, ING and Citi have raised their China growth outlook for 2019 on Wednesday, though others may be holding off for now, CNBC reported.
The Chinese government announced Wednesday that gross domestic product expanded by 6.4 percent year-on-year in the first three months of 2019. That was higher than the 6.3 percent predicted by analysts in a Reuters’ poll.
By comparison, China’s economy grew by 6.4 percent year-on-year in the fourth quarter of last year, and 6.8 percent in the first quarter of 2018. The first-quarter figure came as investors watched closely to see if months of government efforts to stimulate the world’s second-largest economy — hit by the trade war with the United States — were succeeding in putting a floor on slowing growth.
The general consensus was that it had, though opinions differed on whether the result was enough to justify altering forecasts.
Economists at Barclays raised their expectation for GDP expansion for this year to 6.5 percent from the previous 6.2 percent, citing the surprise first-quarter growth result.
In a note Wednesday, they said the figure was boosted by “greater impact” from government stimulus measures as well as factors including signs of improving housing and property markets and a better export outlook.
Citi also raised its annual GDP forecast to 6.6 percent from 6.2 percent on Wednesday, citing a more optimistic outlook for a U.S.-China trade deal and stronger domestic demand in China.
“Our new baseline scenario is that a framework trade deal between the U.S. and China will be reached in (the second quarter) and it will lift most, if not all, existing punitive tariffs,” economists at the U.S. bank wrote.
Meanwhile, ING lifted its forecast to 6.5 percent from its previous 6.3 percent, calling stimulus-fueled infrastructure projects and 5G telecoms production the “real growth engine” in the first quarter.
Iris Pang, ING’s Greater China economist, said in a note Wednesday, “We think the trend could continue for the rest of the year.”
China is officially targeting growth of between 6.0 percent to 6.5 percent this year, CNBC noted.