China’s economy grew 4.5% in the first quarter, the fastest pace in a year.

China’s first-quarter gross domestic product rose sharply as central banks hiked inflation to curb inflation.

Gross domestic product grew by 4.5%, China’s National Bureau of Statistics announced on Tuesday. That would mark the fastest growth since the first quarter of last year – when China’s economy grew 4.8% – and better than the 4% forecast in a Reuters poll. Quarter-on-quarter, the economy grew by 2.2%.

China’s progress has come into focus as it reopens after lifting most of its three-year-old Covid restrictions. The economy grew 2.9 percent in the fourth quarter of 2022.

Retail sales rose 10.6 percent in March, while online sales of physical goods rose 10.6 percent. Industrial production grew by 3.9%, slightly lower than the Reuters forecast of 4%.

Year-to-date fixed asset investment was weaker than expected and rose 5.1 percent from a year ago, following a slowdown in growth in infrastructure and manufacturing investments. Meanwhile, real estate investment continues to decline.

The economy grew by 3% in 2022, lower than Beijing’s official target of 5.5% set in March last year. For 2023, the government last month set a modest growth target of “around 5%”.

China’s economy could see another boost from government stimulus later in the year, Helen Zhu, managing director of NF Trinity, told CNBC’s “Street Signs Asia” shortly after the data was released.

“I think we’re on track for the second quarter to be 5% above target, and we’ll have a lot of policy stimulus in the third quarter,” she said.

She added that the latest reading will push back skeptics of China’s 2023 full-year growth target and will make revisions to GDP forecasts accordingly.

“The numbers are definitely better than anyone’s expectations, and I think it’s a great start to the year,” she said.

Iris Pang, ING’s chief China economist, said she expects the Chinese government to release more stimulus to boost infrastructure investment and consumption.

“In order to maintain the 5% growth target for 2023, the government must push forward infrastructure investments, most of which must build metro lines and increase the number of 5G towers because these are already in the plan for this year,” she wrote. A note before the GDP report.

“Therefore, we expect GDP to grow at a faster rate of 6.0% YoY in the second quarter. We maintain our full-year GDP forecast at 5% as foreign demand should remain a concern for the year,” Pang wrote.

Compared to a year ago, the value of China’s service sector also grew by 5.4 percent after the economy ended its zero-covid policy.

The services index, led by hospitality, dining and information technology services, rose 9.2 percent in March.

But economists have warned that China’s economic recovery may take longer than expected – pushing the Hang Seng index, such as Citi, back on target by three months.

While most analysts polled by Reuters expect no change in central bank lending rates, some believe the People’s Bank of China may cut its one-year lending rate slightly if China’s inflation slows further.

China’s consumer price inflation hit an 18-month low earlier this month.

– CNBC’s Evelyn Cheng contributed to this report.