Goldman Sachs(US:GS) Goldman Sachs·2025-05-12 08:41Investment Rating - The report maintains a real GDP growth forecast of 4% for 2025, with a revised export volume growth forecast for 2025 adjusted to -5% from -10% previously, indicating a more resilient export performance than initially expected [1][3]. Core Insights - Chinese exports showed unexpected strength in April, with a year-over-year increase of 8.1% in USD terms, which was significantly above market expectations. This resilience is attributed to trade re-routing and front-loading activities during a temporary tariff pause [2][3]. - The report suggests that the better-than-expected export performance reduces immediate pressure on Beijing for aggressive policy easing, with the next critical milestone for potential easing being the July Politburo meeting [4][9]. - The forecast for overall real domestic demand growth has been slightly lowered to 4.5% for 2025, down from 5.0%, reflecting a delay in the rotation towards domestic demand due to sustained export strength [9][21]. Summary by Sections Export Performance - The report highlights that despite weaker signals from manufacturing PMIs, actual trade data showed resilience, with exports expected to decline by 5% in 2025, a revision from a previous forecast of -10% [3][4]. - The net export contribution to GDP is now forecasted at -0.5 percentage points, an improvement from the earlier estimate of -1.0 percentage points [3]. Policy Outlook - Following recent monetary policy adjustments, including a 50 basis point cut in the reserve requirement ratio and a 10 basis point policy rate cut, the report anticipates further policy rate cuts of 20 basis points for the remainder of the year [4][8]. - The augmented fiscal deficit is projected to widen from 10.4% of GDP in 2024 to 13.5% in 2025, indicating a more significant fiscal stimulus than previously expected [8][16]. Inflation and Trade Uncertainty - The report anticipates continued PPI deflation, with forecasts for PPI inflation at -2.1% for 2025 and -0.6% for 2026, reflecting sluggish domestic demand and overcapacity in various industries [10][19]. - There remains high uncertainty regarding US-China trade relations, with expectations that bilateral tariffs may decrease from current levels of over 100% to around 50-60% in the near future [11][20].