Goldman Sachs has downgraded its China growth forecast, saying recent interest rate cuts may not be enough to combat slowing domestic demand, headwinds from rising COVID cases -19 and the pressure on the electricity sector due to the exceptionally hot summer.

The global investment bank lowered its full-year 2022 forecast to 3.0% from 3.3%.

Earlier this week, China’s central bank unexpectedly lowered two key interest rates to support the flagging economy.

Other banks have also lowered their forecasts for the Asian giant. Standard Chartered cut its growth forecast in China to 3.3% and Nomura to 2.8% from 4% previously. Nomura said China’s policy response “could be too little, too late and too ineffective.

The IMF predicted in July that China’s economy would grow 3.3% this year, though down from the 4.4% call it made in April.

Goldman Sachs, in a note on Thursday, said China’s rate cuts buck the global trend of tighter conditions as most economies continue to face high inflation. He added that the economic recovery from the pandemic may have stalled or even reversed somewhat in July.

The investment bank also cut its forecast for China for 2023 to 5.3% from 5.5%, but admitted that the outlook “remains highly uncertain at this time and crucially depends on developments in the sector. real estate and COVID policy over the coming quarters.”

Nomura also lowered its 2023 GDP forecast to 5.1% from 5.5% earlier.

(Reporting by Brinda Darasha; editing by Seban Scaria)

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