Goldman Sachs lifts China 2024 growth forecast to 5.0%

BEIJING (Reuters) -Goldman Sachs has raised its forecasts for China’s year-on-year economic growth for the first quarter and the full year of 2024 due to the country’s manufacturing strength, the investment bank said in a note on Wednesday.

It raised its forecast for China’s year-on-year gross domestic product (GDP) growth this year to 5.0% from 4.8% in November last year, according to the note.

It also lifted the first-quarter GDP growth forecast for the world’s second-biggest economy to 5.0% from 4.5% prior, with previous official data beating expectations and the latest high-frequency data showing resilience.

Economic data over the January-February period and March manufacturing PMI surveys offered tentative relief to Chinese policymakers, after the economy failed to post strong recovery since reopening from COVID shutdowns.

Officials this year are putting their faith in “New Productive Forces”, a term coined by Chinese President Xi Jinping in September last year underscoring the need for economic development based on innovation in advanced sectors.

“Consistent with the manufacturing strength, our inventory tracker shows a material inventory build in Q1, though it is less dramatic than the one a year ago during China’s rapid reopening,” the Goldman Sachs note said.

However, the investment bank said China’s second-quarter economic growth is likely to soften because the inventory accumulation in January-March will need to be digested and policymakers may step away from further easing given the robust growth in the first quarter as well as a low base of the second quarter in 2023.

Taken together, these changes lift its 2024 full-year growth forecast, while its China 2025 growth forecast remains at 4.2%.

“For 2024, the government will likely achieve its goal of ‘around 5%’ real GDP growth. In the medium term, the prolonged property downturn and increased trade barriers targeting Chinese exports should pull growth back to the around 4% trend that we estimate,” the bank’s note added.

China’s statistics bureau will release March inflation data on Thursday and trade data on Friday. The GDP growth of the first quarter and March activity indicators will be published next week.

(Reporting by Ellen Zhang and Kevin Yao; Editing by Andrew Heavens and Emelia Sithole-Matarise)