Banks Cut China Growth Forecasts

The rapid deterioration in China’s economic momentum has put focus squarely on the world’s number-two economy, with several banks sharply cutting their gross domestic product (GDP) forecasts.

Bank of America Merrill Lynch (BofAML), Barclays and Nomura lowered their growth projections for the mainland economy late Thursday, following a spate of disappointing economic data for the January-February period.

BofAML’s downgrade was among the most aggressive; it cut its first quarter GDP growth forecast to 7.3 percent from 8.0 percent, and its annual growth forecast to 7.2 percent from 7.6 percent.

Nomura revised down its first quarter growth forecast to 7.3 percent from 7.5 percent, noting that it sees downside risks to its full-year forecast of 7.4 percent.

“Given weaker-than-expected economic activity in January-February, we need to lower our GDP growth forecast for the first quarter, although we maintain our view on the trajectory growth: slowing in the first-half to a bottom in the second quarter at 7.1 percent and rebounding in the second half to 7.5 percent as we think policy will likely loosen significantly in the second quarter,” Zhiwei Zhang, chief economist at Nomura wrote in a note.

While the government maintained its official 2014 growth target at 7.5 percent, Premier Li Keqiang said there is some “flexibility” around the target during a press conference at the close of the National People’s Congress (NPC) on Thursday, seeming to indicate a willingness to tolerate slower growth.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza