IMF upgrades China's growth forecast for 2017 to 6.7%

KUALA LUMPUR — The International Monetary Fund (IMF) on Monday revised up China's growth forecast for 2017 and 2018 to 6.7 percent and 6.4 percent respectively.

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.