KUALA LUMPUR - The International Monetary Fund (IMF) on Monday revised upwards China's growth forecasts for 2017 and 2018 to 6.7 percent and 6.4 percent, respectively.
International Monetary Fund said it now expected stronger growth of 6.7 percent in 2017, up 0.1 percentage point from the April forecast
The updated World Economic Outlook report, which came days after China posted a stronger-than-expected second quarterly performance, was a reflection of a solid first quarter underpinned by previous policy easing and supply-side reforms, including efforts to reduce excess capacity in the industrial sector, the IMF said.
China has set its full-year growth target at "around 6.5 percent." The 6.7-percent forecast will leave the world's second-largest economy on a par with its growth level in 2016. The fund also revised up China's economic forecast for 2018 by 0.2 percentage point to 6.4 percent, citing expectations that China may maintain high public investment and delay fiscal adjustment to meet its target of doubling the 2010 real gross domestic product (GDP) by 2020. But the IMF also warned against strong credit growth that may come with rising downside risk to medium-term growth.
Maurice Obstfeld, chief economist of the IMF, recommended China go through a very important rebalancing process, which will inevitably entail a slowing path of growth. He said China's recent moves to redress non-performing loans and a coordinated financial oversight overhaul are welcome.
The revision followed an April upgrade by the IMF on China's GDP growth forecast to 6.6 percent and 6.2 percent for 2017 and 2018 respectively, 0.1 percentage point and 0.2 percentage point higher than its forecast in January.
In its updated World Economic Outlook, the IMF said global gross domestic product would be 3.5 percent in 2017 and 3.6 percent in 2018. Its last update was released in April.
"While risks around the global growth forecast appear broadly balanced in the near term, they remain skewed to the downside over the medium term," the IMF said in its updated forecasts released in the Malaysian capital, Kuala Lumpur.
The IMF in June shaved its forecasts for US growth to 2.1 percent for 2017 and 2018, slightly down from projections of 2.3 percent and 2.5 percent, respectively, just three months ago. The Fund reversed previous assumptions that the Trump administration's fiscal policy plans would boost U.S. growth, largely because details of those plans have not materialized.
The Fund said growth in the euro area was now expected to be slightly stronger in 2018 and pointed to "solid momentum."
It upgraded GDP projections for the single-currency area for 2017 to 1.9 percent, 0.2 percentage point higher than in April. For next year, the IMF said euro-area growth would be slightly stronger at 1.7 percent, a 0.1-percentage-point change from just three months ago.
It said the expected higher growth in the eurozone indicated "stronger momentum in domestic demand than previously expected."
The IMF revised down its 2017 forecast for the UK by 0.3 percentage point to 1.7 percent, citing weaker-than-expected activity in the first quarter. It left its 2018 forecast unchanged at 1.5 percent.
It also said it expected slightly higher growth in Japan this year to 1.3 percent from a forecast of 1.2 percent in April, citing stronger first-quarter growth buoyed by private consumption, investment and exports. Its forecast for Japan's 2018 growth was unchanged at 0.6 percent.