Fitch Ratings recently raised China's 2023 GDP forecast from 5.2 percent to 5.6 percent after a swifter-than-expected reopening rebound in the first quarter.
"China's reopening rebound was a lot stronger in the first quarter than we had anticipated," said Brian Coulton, chief economist with Fitch Ratings, in the June Global Economic Outlook, a report released by the credit rating agency earlier this month.
China's GDP expanded by 4.5 percent year-on-year in the first quarter, compared to an estimated 2.8 percent in a previous report issued by Fitch Ratings in March. Consumption, property sales and exports all recovered rapidly in February and March, said the credit rating agency.
Although the country's monthly macro data releases for April and May slowed, the broader picture of a growth recovery driven by a normalization of consumer spending looks intact. Retail sales continued to expand robustly in May. PMI services balances remained well above 50 and consumer confidence surveys have started to recover, said Fitch Ratings.
Moreover, household income prospects will continue to improve as labor demand recovers and the unemployment rate falls. Also, there are some signs of stabilization in the property sector. Housing completions have picked up sharply, suggesting that work on stalled projects has resumed. This matters for restoring buyer confidence given the dominance of pre-sales in the market for new housing, said the credit rating agency.
"The authorities' willingness to provide some macro policy stimulus to support growth also looks to be increasing. The People's Bank of China cut the seven-day reverse repo rate and the one-year medium-term lending facility and loan prime rates by 10 basis points in June. Further cuts in banks' reserve requirement ratios also look likely after the recent dip in credit growth. With consumption recovering and the drag from falling construction activity easing, domestic demand growth will pick up in 2023," said Fitch Ratings.