China's economy will edge up 2.5 percent in 2020, according to a report by UBS Group AG that raised its forecast from 1.5 percent due to the recovery in domestic consumption and strong investment.

Chinese economy will expand 5.5 percent this quarter from a year earlier, and 6 percent in the final three months of 2020, the bank's chief China economist Wang Tao said.

The surprising strength of Chinese exports in the second quarter prompted the economists to increase their estimate for trade in the rest of the year, and they also revised up the inflation forecast to 2.5 percent for 2020 from 2.4 percent earlier, the report said.

The world's second-largest economy grew by 3.2 percent in April-June from a year earlier, reversing a 6.8-percent decline in the first quarter – the first contraction since at least 1992 when official quarterly gross domestic product (GDP) records started.

"China's economy has staged an impressive comeback since mid-March, driven by pent-up demand, a catch-up in production, a surge in medical product exports and stimulus in both China and other major economies that has supported demand for goods made in China," said Lu Ting, chief China economist from Nomura. 

The property sector is expected to show more resilience, thanks to the economic recovery and effects of easier credit, said the report, noting that Oxford Economics also upgraded its full-year GDP forecast to 2.5 percent from 2 percent on a strong rebound in the second quarter.

"Assuming no significant resurgence of COVID-19 in China and new cases will be dealt with in a more targeted manner as in Beijing, we expect domestic consumer demand to improve further in H2 2020," it added.

Solid inbuilt momentum in the domestic economy, coupled with external tailwinds from recovering global demand, are setting the stage for a further growth acceleration in the second half of the year, Aidan Yao, senior economist at AXA Investment Managers in the survey, was quoted as saying.

(With input from Xinhua)