Good GDP growth in Q1: Analysts raise full-year forecasts for China’s economy

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• China’s economy grew significantly in the first quarter of the year
• Analysts raise their annual forecast for China’s economy
• Look ahead to April meeting

China’s economy is growing faster in Q1 than it has been in a year

China’s economy is back in the spotlight after nearly three years of strict COVID restrictions were lifted. As CNBC reports, in the first quarter of this year, China’s economy grew at its fastest rate in a year. Overall, the country’s GDP grew by a whopping 4.5 percent, according to China’s National Bureau of Statistics, according to CNBC. In the first quarter of last year, China’s GDP growth was 4.8 percent.

Retail sales rose as much as 10.6 percent in March 2023 as online sales of physical goods increased. Industrial production also rose 3.9 percent, slightly below Reuters’ forecast of four percent. Year-to-date fixed investment was also weaker than expected, rising 5.1 percent year-on-year as growth in infrastructure and manufacturing investment slowed. Real estate investments, meanwhile, also continued to decline. According to Goldman Sachs, growth of 4.5 percent in the first quarter supports the company’s full-year forecast for the Chinese economy to grow by 6 percent. “Today’s data is consistent with our bullish view on China’s full-year growth,” Hui Shan, Goldman Sachs’ China chief economist, told CNBC. “That’s the nature of the rebound after reopening [und] is the core of why we have our better-than-consensus forecast of 6 percent growth for the full year,” she said.

Some analysts raise full-year forecasts for China’s economy

JPMorgan and Citi are also optimistic about the annual forecasts for China’s economy, as CNBC also reports. Accordingly, JPMorgan raised its growth forecast for 2023 to 6.4 percent from the previous 6 percent and stated that the latest quarterly report points to further growth: “The strong GDP report for the first quarter points to a strong recovery after the reopening. A A number of factors led to the strong rebound in Q1, including a notable uptick in travel-related consumption and services. The stronger-than-expected Q1 GDP result raises our full-year GDP growth forecast.” Haibin Zhu, chief China economist at JPMorgan.

Citi analysts raised their forecast to 6.1 percent from the previous 5.7 percent and said the Chinese economy is on track to recover from the pandemic – buoyed by consumption and services. The stronger-than-expected growth also points to further growth. “Given that a meaningful recovery may not materialize until after the Chinese New Year, the underlying momentum may be stronger than the headline suggests,” said Citi economists, led by Xiangrong Yu.

UBS also raised its annual forecast from 5.4% to 5.7% in the first quarter of 2023 given the stronger than expected recovery.

Upcoming April meeting

As Citi also notes, according to CNBC, the upcoming Politburo meeting could be an opportunity for policymakers to instill more confidence in the private sector. One does not assume that the political decision-makers would sit back now, since various “structural problems require additional efforts”. “This year could also be an opportunity for government to find a holistic and institutional solution to local government debt. As the economy stabilizes, structural reforms could be the next issue to keep an eye on,” Citi said -Economists.

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