The World Bank yesterday raised its forecast for China’s economic growth this year to 6.8 percent from 6.7 percent it projected in October, as personal consumption and foreign trade supported growth.
However, the Washington-based lender kept its forecast for China’s GDP growth next year and in 2019 unchanged at 6.4 percent and 6.3 percent, respectively, due to less accommodative monetary policy and the government’s effort to rein in credit and control leverage.
The key downside risks to the forecast are the still rising leverage of the non-financial sector and uncertainty around housing prices.
“Despite the recent slowdown, credit continues to grow considerably faster than GDP. Outstanding bank loans reached 150 percent of GDP in November 2017, up from 103 percent at the end of 2007,” the World Bank said in its China Economic Update.
China’s economy grew at a faster-than-expected 6.9 percent in the first nine months of the year, but Beijing’s campaign to reduce risks in the financial sector has pushed up borrowing costs, raising concerns GDP growth could take a hit next year.
However, strong growth so far this year has given policymakers an opportunity to accelerate deleveraging, which is “likely to come at the cost of slower GDP growth in the near term, but will improve China’s long-term economic prospects,” the World Bank report said.
External risks to China’s economy include the potential for more restrictive trade policies in advanced economies and geopolitical tensions, the report said.
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