World Bank raises China growth forecast to 5.6%
Updated: June 8, 2023 09:06

The World Bank has predicted that China's economy will grow at 5.6 percent this year, up by 1.3 percentage points from its January forecast, while it has revised down projections for most economies, as it sees global growth on a precarious footing amid high interest rates.

This prospect for China is more optimistic than that outlined by the International Monetary Fund in April in its World Economic Outlook, which forecast the country's growth to stay at 5.2 percent this year, when the world is embarking on a rocky economic recovery road.

In its Global Economic Prospects report released on Tuesday, the World Bank said that economic activity in China bounced back in early 2023, spurred by the country's optimized COVID-19 response measures, which drove consumer spending, particularly on domestic services.

China has set a target of around 5 percent for its GDP growth this year. It posted a growth rate of 4.5 percent year-on-year in the first quarter, a significant improvement from the 2.9 percent in the last quarter of 2022, according to the National Bureau of Statistics.

Global growth is projected to decelerate from 3.1 percent in 2022 to 2.1 percent in 2023, according to the World Bank report.

This forecast is up by 0.4 percentage points compared with the global lender's January report, as activity in major advanced economies and some emerging markets and developing economies, or EMDEs, did not slow down as much as expected at the turn of the year.

"Notably, the rapid reopening of China's economy contributed materially to an upward revision to this year's growth forecast," it said.

On the upside, a more vigorous consumption recovery could support growth for longer than expected in China, where inflation is expected to remain below target, allowing monetary policy to remain mildly accommodative, according to the report.

In advanced economies, growth is set to contract from 2.6 percent in 2022 to 0.7 percent this year, and remain weak in 2024, the report said.

As for the EMDEs, the World Bank noted that although most of them have seen only limited harm from the recent banking stress in advanced economies, they are now sailing in dangerous waters.

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