Moody's Sees Strong China Bolstering G-20 Growth in 2017-18

--Revises Up China's 2017 GDP To 6.8% From 6.6%; 2018 to 6.4% from 6.3%

--G-20 Countries Expected To Grow Above 3% in H2 2017 and 2018

     BEIJING (MNI) - Moody's Investors Service has upgraded its economic growth

forecasts for China and the world's G-20 economies this year and next, pointing

to a "synchronized global economic expansion" that the ratings service expects

to last through 2018.

     In  its Global Macroeconomic Report released Wednesday, Moody's revised

China's 2017 forecast to 6.8%, from the previous 6.6%, and said growth in 2018

would be 6.4%, up from its previous 6.3% forecast. It based the upgrade on

China's stronger-than-expected growth of 6.9% in Q1 and Q2 this year, which it

attributed largely to strong infrastructure spending.

     Despite the upgrade, China's growth is expected to decelerate gradually

over the next few years "as less policy stimulus is provided and as the

authorities seek to balance their renewed commitment to slowing the growth of

leverage while continuing to meet growth targets," Moody's said.

     "Structural factors (demographics, rebalancing and slowing productivity)

and cyclical factors (cooling in the property sector and credit cycle) will

continue to drive down the growth rate gradually over the next few years,"

Moody's said.

     Moody's also said the world's top 20 industrialized countries will

collectively grow at a rate exceeding 3% for the rest of this year and 2018,

well above the 2.6% growth the G-20 countries notched in 2016, underpinned in

particular by strong growth in China, Japan and South Korea.  

     "Several mutually reinforcing factors are aiding economic acceleration,

including accommodative monetary policy, lower fiscal drag, growth-focused

economic policies in China, stable commodity prices and moderation of global

risks," the report said.

     While the balance of risks in the world is now tilting in a more favorable

direction, Moody's said, China's deleveraging measures, the Korean Peninsula

crisis, potential conflicts in the South China Sea, and excessive monetary

policy tightening in advanced economies were all areas of concern.

     "We believe that the likelihood of geopolitical risks materializing is

small, but a significant escalation of any of these situations could be severely

detrimental," Moody's warned.

     Moody's also revised Japan's growth up to 1.5% this year from its previous

forecast of 1.1%, based on surging domestic demand. It said growth in 2018 would

be 1.1%, up from its previous forecast of 0.8%. 

     Growth in South Korea is expected to be 2.8% this year and 2.5% in 2018, up

from the previous forecasts of 2.5% and 2.0%, respectively.

     Moody's also said that although strengthening growth amid the current low

inflationary environment in most of the advanced economies "presents a puzzle,"

it expects that "many of the factors holding inflation back in advanced

economies will be resolved over time."

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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