(Yicai) Jan. 20 -- The International Monetary Fund has lifted its economic growth forecast for China this year, attributing the upgrades to reduced trade tensions with the United States and continued domestic stimulus.

China's gross domestic product will likely expand 4.5 percent in 2026, compared with a 4.2 percent forecast in October, the IMF said yesterday in its latest World Economic Outlook. The prediction for 2027 was set at 4 percent amid structural headwinds.

The revision reflects the lower US effective tariff rates on Chinese goods as a result of the year-long trade truce agreed to in November and stimulus measures that are assumed to be implemented over two years, the IMF explained.

There are relatively strong measures that were put in place through the years that helped support economic activity and are expected to carry over into 2026, Pierre-Olivier Gourinchas, chief economist at the IMF, told Yicai. "We expect that the effect of the trade shock is going to be fading, and so that is providing some support to economic activity going forward."

The IMF also raised China's 2025 growth estimate to 5 percent from 4.8 percent yesterday, matching the actual GDP expansion announced later that day by the National Bureau of Statistics. China's GDP reached record CNY140.2 trillion (USD20.1 trillion) last year.

Global growth is projected to remain resilient at 3.3 percent this year and at 3.2 percent next year, according to the IMF. "The forecast marks a small upward revision for 2026 and no change for 2027 compared with that in the October 2025 WEO."

The IMF also lifted the US GDP growth forecast for this year to 2.4 percent from 2.1 percent, buoyed by fiscal policy and a lower policy rate, while the impact of higher trade barriers also gradually wanes. "Technology-driven momentum is expected to moderate but still provide some offset to lower immigration and moderating consumption."

The World Bank predicted global growth of just 2.6 percent this year in its Global Economic Prospects released on Jan. 13. Its projected 2026 economic growth for China is 4.4 percent, closely aligned with the IMF's assessment, and that for the US is 2.2 percent, slightly below the IMF forecast.

Editor: Futura Costaglione