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The full-year GDP forecast is lowered to 4.6%, and budget acceleration will provide support for growth in the second half of the year (Morgan Stanley)

2026-07-17·ima-daily5min-0717-07-6766548091

Street Signal | The full-year GDP forecast is lowered to 4.6%, and budget acceleration will provide support for growth in the second half of the year (Morgan Stanley)

Morgan Stanley lowered China's full-year GDP growth forecast for 2026 by 20 basis points to 4.6%, mainly because the 4.3% GDP growth rate in the second quarter was lower than the target and market expectations.

The report pointed out that the K-shaped economic differentiation has deepened, exports and high-tech production are stable, but domestic demand continues to be weak. This means that achieving the growth target of “around 5%” faces greater challenges, and policies must be adjusted.

The market has certain expectations for a reduction in growth rate, but there are differences on the specific magnitude and subsequent policy intensity. The research report believes that the lower-than-expected second-quarter data will promote the acceleration of infrastructure budget investment in the third quarter.

Coupled with factors such as falling oil prices, GDP growth in the second half of the year is expected to rebound to about 4.6%, maintaining the "low at first and then high" rhythm judgment.

One-sentence conclusion: Morgan Stanley has significantly lowered its full-year GDP forecast to reflect the weakness of the 2Q economy, but believes that fiscal efforts in the second half of the year will promote a rebound in growth. The key lies in the speed of policy implementation.

Positive/negative: Positive for infrastructure and energy (AI) fields; negative for large-cap consumer stocks that rely on domestic consumer demand. The market may have reacted to the weakness in Q2, but consensus on recovery in the second half of the year has not yet been fully formed, and there is a gap in expectations. Catalysts:

1) The specific policy deployment of the Political Bureau meeting in July;

2) The actual implementation of infrastructure investment projects and budget funds in the second half of the year.

Full text

The full-year GDP forecast is lowered to 4.6%, and budget acceleration will provide support for growth in the second half of the year (Morgan Stanley)

Morgan Stanley lowered China's full-year GDP growth forecast for 2026 by 20 basis points to 4.6%, mainly because the 4.3% GDP growth rate in the second quarter was lower than the target and market expectations. The report pointed out that the K-shaped economic differentiation has deepened, exports and high-tech production are stable, but domestic demand continues to be weak. This means that achieving the growth target of “around 5%” faces greater challenges, and policies must be adjusted. The market has certain expectations for a reduction in growth rate, but there are differences on the specific magnitude and subsequent policy intensity. The research report believes that the lower-than-expected second-quarter data will promote the acceleration of infrastructure budget investment in the third quarter. Coupled with factors such as falling oil prices, GDP growth in the second half of the year is expected to rebound to about 4.6%, maintaining the "low at first and then high" rhythm judgment. One-sentence conclusion: Morgan Stanley has significantly lowered its full-year GDP forecast to reflect the weakness of the 2Q economy, but believes that fiscal efforts in the second half of the year will promote a rebound in growth. The key lies in the speed of policy implementation. Positive/negative: Positive for infrastructure and energy (AI) fields; negative for large-cap consumer stocks that rely on domestic consumer demand. The market may have reacted to the weakness in Q2, but consensus on recovery in the second half of the year has not yet been fully formed, and there is a gap in expectations. Catalysts: 1) The specific policy deployment of the Political Bureau meeting in July; 2) The actual implementation of infrastructure investment projects and budget funds in the second half of the year.

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