Goldman Sachs has cut their forecasts for China’s growth, arguing that the recent interest rate cuts may not be enough to combat slowing domestic demand, headwinds from rising COVID-19 cases and pressure on the power sector due to the unusually hot summer.

The global investment bank lowered its 2022 full-year forecast to 3.0% from 3.3%.

Earlier this week, the Chinese central bank unexpectedly cut two key interest rates in moves to support the flagging economy.

Other banks have also slashed their forecasts for the Asian giant. Standard Chartered cut its China growth forecast to 3.3% and Nomura to 2.8% from 4% earlier. Nomura said China's policy response "might be too little, too late and too inefficient.

The IMF in July forecast China's economy to grow by 3.3% this year, albeit down from the 4.4% call it made in April.

Goldman Sachs, in a note on Thursday, said the rate cuts in China go against the global trend of tightening conditions as most economies continue to contend with high inflation. It added that economic recovery following the pandemic may have stalled or even reversed somewhat in July.

The investment bank also cut their China forecast for 2023 to 5.3% from 5.5%, but admitted the outlook "remains highly uncertain at this moment and depends crucially on the developments in the property sector and COVID policy in the coming quarters.”

Nomura also lowered 2023 GDP forecast to 5.1% from 5.5% earlier.

(Reporting by Brinda Darasha; editing by Seban Scaria)