China Economy | Morgan Stanley Slightly Lowers China's GDP Growth Forecast for This Year

Morgan Stanley makes a slight cut to its China economic growth forecast for this year, lowering the projection from 4.8% to 4.7% from the prior estimate, because in the baseline scenario, rising oil prices will have an impact. The firm’s baseline scenario assumes oil prices will stay at around $110 per barrel in the second quarter, before falling back afterward.

Citing Morgan Stanley’s report, foreign media said this is one of the smallest adjustments the company has made to its growth-rate outlook for the Asia region. This reflects China’s energy substitutability, as well as policy flexibility in a backdrop of a lower inflation starting point.

Morgan Stanley’s baseline forecast is that Brent crude prices will fall to around $90 per barrel by the fourth quarter, and to $80 per barrel by 2027, provided that the actual closure status of the Strait of Hormuz lasts only until the end of April. Under a risk scenario in which the Strait of Hormuz remains closed for several months, oil prices would spike to $150 to $180 per barrel within the second quarter, before gradually coming down, and reaching $80 per barrel by 2027.

Morgan Stanley expects that under the baseline scenario this year, China’s PPI will be 1.2%, and CPI will be 0.8%.