China 2021 growth forecast raised to 8.5% – World Bank

SINGAPORE (ICIS)–China’s economic growth is projected at 8.5% this year before slowing to 5.4% in 2022 as low base effects dissipate and the economy returns to its pre-COVID-19 conditions, the World Bank said in a report.

The new forecast is an upgrade to the World Bank’s earlier forecast of 8.1% made earlier this year.

“As the recovery becomes more entrenched, the structure of aggregate demand is expected to continue to rotate toward private domestic demand,” it said in a report on 29 June.

China’s economy expanded by 2.3% in 2020.

Consumption growth in China is projected to gradually return to its pre-COVID-19 trend, supported by the ongoing labour market recovery, rising household incomes and improved consumer confidence.

Investment will also remain an engine of growth, but its structure is expected to shift toward private investment as manufacturing capital expenditure picks up, offsetting cooling infrastructure and property investment.

As the global recovery is gaining momentum, export demand is expected to keep industrial capacity utilisation high in the short term.

However, the contribution of net exports to growth will moderate in the medium term as import growth picks up and international travel slowly resumes in 2022.

“As China’s recovery firms up, macroeconomic policies are expected to shift from accommodative to more neutral settings,” the World Bank said.

“The pace of policy normalisation, however, should continue to be data-dependent and calibrated to the strength of the recovery in China and the rest of the world,” it said.

Looking beyond this year’s rebound, China’s policymakers should redouble their efforts toward promoting growth-enhancing structural reforms and steering the economy onto a greener, more resilient, and inclusive development path, the World Bank noted.