(Yicai Global) Dec. 20 -- International investment banks are optimistic about China’s economic performance next year after the country relaxed its Covid-19 controls, predicting growth of 5 percent or higher in 2023.

Given the faster-than-expected lifting of pandemic controls, China's economy will start to improve after March, earlier than previously forecast. This earlier and stronger recovery will help boost gross domestic product growth by 0.4 percentage point to 5.4 percent next year, according to a new report by Morgan Stanley.

The report expects China’s social mobility to return to levels prior to Shanghai’s lockdown by the end of next March, and to December 2019 levels over the summer.

Coupled with broad easing in the economy, a possibly stronger real estate easing policy, for example, Morgan Stanley expects China's GDP growth to rebound more strongly from the second quarter of 2023 and remain at a higher level for a longer period.

Goldman Sachs also raised its 2023 growth forecast for China to 5.2 percent from 4.5 percent. Shan Hui, chief economist at Goldman Sachs China, said the country is reopening at a faster-than-expected pace. “While the initial phase of re-opening may hurt growth, the rebound thereafter should be significant,” she said.

Goldman Sachs cut its China GDP forecast in the fourth quarter of this year, while raising its full-year outlook for 2023. The adjustment is driven by both the acceleration of China’s reopening and a lower base in 2022, according to Shan.

Lu Ting, chief economist at Nomura China, told Yicai Global that there are concerns that a rapid uptick in Chinese inflation next year could lead to a significant policy contraction in the second half, but said monetary and fiscal policy support will likely continue next year.

In addition, he noted that the tight financing policy for the real estate sector, which began in late 2020, has been completely reversed. As the pandemic fades out after next spring, the property market is expected to recover. “But it will still be challenging to have a double-digit (20 percent to 30 percent, for example) rebound,” he added.

Nomura China forecasts Chinese growth this year at 2.8 percent, but with downside risks. It is expected to rebound to 4.8 percent next year after the strict pandemic control measures were relaxed.

Editors: Tang Shihua, Peter Thomas