BEIJING: The World Bank on Thursday raised its forecast for economic growth in China this year to 7.2 per cent from 6.5 per cent, citing massive government spending as the main reason for the revised figure.

"Developments in the real economy have been somewhat better than expected three months ago. More importantly, bank lending in the first part of 2009 has been much larger than expected," the World Bank said.

"Government expenditure has also substantially outpaced expectations in the first five months. In this light, we forecast (economic) growth of 7.2 per cent in 2009," it said in its quarterly update on China.

China, the world's third-largest economy, started to be heavily impacted by the global financial crisis in the second half of last year, and unveiled an unprecedented 580-billion-dollar package as an antidote.

The World Bank said that without the massive government input into the economy, its growth forecast for this year would have been little more than 1 per cent.

While predicting "respectable" growth in 2009 and 2010, the World Bank warned it was too early to say if a robust sustained recovery was on the way.

"There are limits to how much and how long China's growth can diverge from global growth based on government-influenced spending, given that China's real economy is relatively integrated in the world economy," it said.

"Meanwhile, market-based investment is likely to continue to lag for a while because of the squeeze on margins amidst spare capacity in many manufacturing sectors."

Consumption was unlikely to pick up, the World Bank said, but argued that it was not necessary or appropriate to add more government stimulus in 2009.

"One reason is that the fiscal deficit is likely to be significantly higher than budgeted and additional stimulus now reduces the room for stimulus in 2010," the report said.


- AFP/so