CHINA’S economy will grow 2.5 percent this year according to UBS Group AG, which raised its forecast from 1.5 percent due to the recovery in domestic consumption and strong investment.

The economy will expand 5.5 percent this quarter from a year earlier, and 6 percent in the final three months of 2020, the bank said in a new report from chief China economist Wang Tao and others. The biggest downside risk to that rebound would be a resurgence of the coronavirus outbreak at home and abroad, they wrote.

U.S.-China tensions, coupled with the prospects for supply chain decoupling and weak company profits, are likely to drag on corporate sentiment and trade, UBS cautioned. But overall, macro-policy will remain supportive in the second half.

The surprising strength of Chinese exports in the second quarter prompted the economists to increase their estimate for trade in the rest of the year, and they also revised up the inflation forecast to 2.5 percent for 2020 from 2.4 percent earlier, due to recent floods in the south and a stronger recovery.

The property sector is expected to show more resilience, thanks to the economic recovery and effects of easier credit, according to the report. (SD-Agencies)