UBS Raises China GDP Growth Forecast to 4.9% From 4.6% After First Quarter Beat Expectations

May 07, 2024 at 12:40 PM EDT

UBS Investment Bank has upgraded its economic growth forecast for China this year to 4.9 percent from 4.6 percent, after a better-than-expected expansion and stronger exports in the first quarter, according to the chief China economist at the Swiss banking giant.

The above expected economic growth and strong export outlook led UBS to upgrade its forecast, Wang Tao, who is also its head of Asia economics, said on April 17, adding that the bank anticipates slower second-quarter growth.

Gross domestic product increased 5.3 percent to CNY29.6 trillion (USD3.8 trillion) in the three months ended March 31 from a year ago, while exports rose 1.5 percent to USD807.5 billion, rebounding from a 1.2 percent drop in the prior quarter, the latest official figures showed.

The upside surprise can be largely attributed to the recovery in exports and better-than-expected service sector value-added growth, Wang said.

Other foreign banks also upgraded their full-year growth forecasts for China following the robust first-quarter data. Development Bank of Singapore raised its estimate to 5 percent from 4.5 percent, while ANZ lifted its prediction to 4.9 percent from 4.2 percent.

UBS has lowered its outlooks for both China’s annual consumer and producer price inflation, leading the bank to lower its nominal GDP growth forecast to 4.9 percent from 5.1 percent to 4.9 percent, Wang said.

UBS upgraded China’s annual export growth forecast in US dollar terms to 3.5 percent from 1.2 percent, and expects net exports to contribute 0.5 percentage point to real GDP growth, she said, while the bank lowered its growth projection for domestic consumption to 5.1 percent from 5.5 percent.

As first-quarter growth surpassed expectations, the Chinese government may be reluctant to roll out any additional policy support, Wang said.

As a result, UBS has removed its earlier call on a cut in the medium-term lending facility rate, but a reduction in the benchmark loan prime rate is still considered likely. UBS also sees downside risk to overall fiscal expansion and infrastructure investment later in the year, she said.

The added value of industrial enterprises above a designated size jumped 6.1 percent in the first quarter from the same period last year, and total retail sales of consumer goods climbed 4.7 percent. Fixed asset investment, excluding rural households, rose 4.5 percent in the period.

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UBS Raises China GDP Growth Forecast to 4.9% From 4.6% After First Quarter Beat Expectations

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