World Bank raises China GDP outlook

The World Bank on Wednesday raised its forecasts for economic growth in China this year and next, saying that strong domestic fundamentals will help offset an expected slowdown in the global economy.

In a quarterly update on China’s economy, it said that the world’s second-largest economy would likely grow by 10 percent this year, up from an earlier forecast of 9.5 percent. Next year’s estimate was lifted to 8.7 percent from 8.5 percent.

Looking to risks in the short-term outlook, the World Bank struck a sanguine note about inflation.

While consumer price rises will probably stay above the 3 percent year-average target set by the Chinese government, there will not be much further run-up, the report said.

Food price increases, a key driver of inflation in China, will decelerate, global commodity prices will be subdued and labor-market flexibility will contain core inflation, it said.

“However, given the fundamental drivers of property prices — rapid urbanization, sizeable income growth and low interest rates — they are unlikely to remain flat for long,” the World Bank said.

It added that while international liquidity poses challenges to monetary policy, these should be more manageable in China than in some other emerging markets.

The World Bank also said that Beijing had begun to move in the right direction by raising interest rates last month for the first time in nearly three years, adding that more rate increases would be necessary.

Source: Reuters