HONG KONG – Citigroup has raised its growth forecast for China to 5 per cent in 2023 as promising data helps build consensus on the nation’s ability to achieve its official government target.

Retail sales and industrial production may improve, Citigroup economists wrote in a note on Wednesday, adding that the nation’s export contraction could also narrow after official manufacturing surveys expanded for the first time in six months.

“The cyclical bottom is here, with all eyes on whether organic demand will pick up amid gathering policy momentum,” they said. The bank’s previous forecast was 4.7 per cent, making it among the more bearish investment institutions in China.

“Previously, we had downgraded our gross domestic product forecast out of policy disappointment,” the economists said, adding that since the end of August, policy momentum had “exceeded expectations clearly” due to some property easing measures.

The most recent poll of economists by Bloomberg showed a median forecast for growth of 5 per cent for the year – in line with the official goal. This is, however, in part because many firms have been downgrading their expectations for the economy as a property crisis drags on activity.

While recent data has indicated that some sectors of China’s economy, such as factory activity, are stabilising, the recovery remains precarious. Economists have pointed to concerns about domestic demand and job market pressures, along with ongoing troubles in the real estate market.

This week is a critical period for activity: Analysts are watching closely the combined Mid-Autumn Festival and National Day holiday period – which began on Sept 29 and runs till Friday – for signs of increased consumer confidence.

Sales at China’s major retailers and restaurants rose 8.3 per cent in the first three days of the holidays versus the same period in 2022 when several regions faced coronavirus restrictions, China Central Television reported, citing data from the Ministry of Commerce.

There will be about 900 million domestic tourist trips made during this year’s holidays, China’s Ministry of Culture and Tourism has predicted. This would translate to an increase of about 5 per cent in daily average domestic tourism revenues compared with the same period in 2019, according to economists at HSBC Holdings.

“The services recovery is likely to be a key driver for sustained recovery momentum,” HSBC economists wrote in a note.

Some economists see a likelihood that the government will need to step up support, particularly for the property sector. The value of new home sales by China’s top 100 developers fell 29 per cent year on year in September, according to China Real Estate Information, improving only slightly from the previous month’s 34 per cent drop. The figures “might indicate a need to step up policy stimulus”, Bloomberg Intelligence analyst Kristy Hung wrote in a note. BLOOMBERG