ADB expects 8.1% GDP growth in China, OECD forecasts 8.5%

China is expected to see 8.1% economic growth this year, as solid export performance and increased fiscal support in the second half will offset a more protracted recovery in household consumption, said economists at the Asian Development Bank (ADB). The forecast was unchanged from its projection in April. However, the ADB lowered the GDP growth forecast for developing Asia, which groups 46 developing economies in the Asia-Pacific region that are members of the bank, to 7.1% this year, down from the prediction of 7.3% in April. “We would expect a more protracted recovery in household consumption in China, while at the same time, this would be compensated by higher infrastructure investment and ongoing good export performance,” said Dominik Peschel, head of the economics unit for the ADB Resident Mission in China. Economists at the bank expect household demand in China to further recover gradually, and this should also help the services sector. “We think people will travel more and demand more services once the Covid situation is fully under control and the restrictions have been lifted,” Peschel said.

Looking ahead, China’s economic fundamentals are still strong and its future growth will remain stable in 2022, said David Chao, Global Market Strategist for the Asia-Pacific region (except Japan) at Invesco. The ADB’s economists also expect China’s monetary policy to ease marginally. “Another cut in the reserve requirement ratio is possible in the second half of this year,” Peschel said. “At the same time, credit to the real estate sector and shadow bank financing will remain tightly regulated.” Peschel said he is looking forward to more fiscal support because there is room to increase spending without incurring a high fiscal deficit as revenue recovers.

An executive meeting of the Chinese government chaired by Premier Li Keqiang adopted the 14th Five Year Plan for New Infrastructure Development, to spur domestic demand, economic transformation and growth sustainability.

The Organization for Economic Cooperation and Development (OECD) said in its interim economic outlook that China’s real GDP is expected to grow 8.5% this year and 5.8% in 2022. Both figures are the same as the OECD’s projections in May, the China Daily reports.