(Yicai) Oct. 15 -- International financial institution Goldman Sachs has revised up its projection for China's economic growth this year and the next because of the country's latest stimulus measures.

China's gross domestic product will likely expand 4.9 percent this year from the year before, compared with the previous 4.7 percent forecast, Goldman Sachs said in a research note on Oct. 13. The GDP growth prediction for next year was raised to 4.7 percent from 4.3 percent.

On Sept. 24, China's central bank and governmental agencies released the country's largest stimulus package since the Covid-19 outbreak to support economic growth. As a result, the main stock indexes began rallying, with the MSCI China Index and CSI 300 Indexes soaring 36 percent and 27 percent, respectively, by the end of September. However, the indexes slumped after the seven-day National Day holiday ended Oct. 7.

"The latest round of China stimulus clearly indicates that policymakers have made a turn on cyclical policy management and increased their focus on the economy," according to economists at Goldman Sachs.

China plans to raise its debt ceiling to help local governments alleviate debt risks, recapitalize state banks, bolster the real estate sector, and aid low-income groups as part of a bold fiscal stimulus package designed to lift confidence and spur the economy, Finance Minister Lan Foan said at a press conference on Oct. 12.

Chinese policymakers will likely approve the expansion of the local government debt swap plan to CNY5 trillion (USD702.3 billion) at the next meeting of the Standing Committee of the National People's Congress, Goldman Sachs predicted. They will also issue additional CNY1 trillion ultra-long government bonds, the New York-based firm noted.

Meanwhile, Morgan Stanley expects the local government debt swap plan to be raised to CNY6 trillion and the issuance of additional ultra-long government bonds to reach CNY2 trillion.

In the short run, positive sentiment and fund flow may be stable, but the impact on economic fundamentals remains to be seen, said Laura Wang, chief China stock strategist at Morgan Stanley.

The ample fiscal deficit expansion pledged by the finance ministry is helpful to stabilize market confidence, as the change of policy direction was most noticeable despite the lack of details, Wang noted, adding that further fiscal measures are expected to be gradually introduced no earlier than next year.

Editors: Shi Yi, Futura Costaglione