Goldman Sachs has become the latest bank to downgrade its gross domestic product (GDP) growth forecast for China, noting the world’s second largest economy faces a “bumpy road ahead.”
The bank lowered its 2014 forecast to 7.3 percent from 7.6 percent late Wednesday. It also cut its 2015 outlook to 7.6 percent from 7.8 percent.
“Both trade and consumption – factors that we had expected to provide positive support to growth this year – disappointed in the first two months of 2014, relating to the anti-corruption efforts, which affected consumption, and the soft DM (developed market) recovery,” economists led by Li Cui, managing director, China Macro Research at the bank wrote in a note.
“The exit of overcapacity sectors, along with the emerging default cases in the related sectors, are negatively impacting growth in the near term but are necessary from a longer-term perspective by allowing proper signals to dampen wasteful investment,” they added.