China’s Central Bank economists predict that the country’s slowing economy will pick up in the second half of the year on the back of more stable home prices and firmer foreign demand. They have also sharply lowered their inflation forecast for 2015.
Economic growth is expected to come in at 7% for 2015, marginally below the 7.1% forecasted earlier in the year. Annual inflation, on the other hand, is projected at 1.4%, substantially lower than the 2.2% projected earlier.
In a Peoples Bank of China (PBOC) report, the economists noted that China’s sagging property market is "starting to stabilize" and that the world economy should show further signs of recovery in the coming months, spurring external demand.
In an effort to support growth, the PBOC cut interest rates by 25 basis points each on three occasions since November, 2014. The economists noted that it takes six to nine months for the economy to realize the benefits of the monetary policy easing.
The PBOC economists acknowledged China's sluggish domestic demand, saying the housing slump and falling global commodity prices had limited spending. However, they predicted that China's housing market could soon turn the corner, spurring new investment in the next six to nine months.
The report observed that housing investment has cooled twice as fast as previously forecasted, and was down 10% in the first four months of 2015 compared with a year earlier. However, "the recent measures introduced to stabilize (economic) growth will show their effects in the next few months," it stated.