CHINA'S economic recovery is likely to continue in 2013, economists said, but accelerating inflation may lead to an interest rate hike in the second half of this year.

The gross domestic product may grow 8.2 percent this year, outpacing the government target of 7.5 percent set earlier this month, Helen Qiao, Morgan Stanley's chief economist for China, said in a media briefing yesterday.

Her optimism is based on a recovering housing market as shown by rising land sales in first-tier and second-tier cities and less policy risks after the leadership transition.

"With lower funding costs compared to a year ago, real estate developers are keen to acquire land and prepare for future development," Qiao said.

Morgan Stanley raised its estimate for this year's inflation to 3.2 percent, up from a previous forecast of 3 percent but still lower than the 3.5 percent official target, as rebounding domestic demand due to easier monetary policies earlier this year will lift consumer prices in the third quarter.

"China's central bank will increase the benchmark interest rate by 25 basis points before year-end as inflation climbs further," Qiao cautioned.

Meanwhile, Standard Chartered Bank economists expected China's economy to expand 8.3 percent this year and consumer prices to rise 4 percent. The bank also estimated a 25-basis-point interest rate rise in the fourth quarter, followed by four more hikes in 2014.

Data released over the weekend showed the growth of industrial output slowed to 9.9 percent in the first two months of this year, down from a 10.3 percent gain in December. Retail sales growth fell to 12.3 percent, compared with December's 15.2 percent.