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8% GDP goal set by Beijing a 'challenge'

CHINA'S economy could expand by 8 percent this year, but the country faces major challenges in achieving that goal, International Monetary Fund Managing Director Dominique Strauss-Kahn said yesterday.

He also told journalists in a Webcast from Washington that China has more room for fiscal stimulus measures beyond its existing 4 trillion yuan (US$585 billion) economy-boosting package launched last year.

Asia's economies, which have been hit hard by the financial crisis, could recover next year, the IMF head said, while warning that the export-dependent continent could not pull through on its own.

The IMF last week announced sharp downgrades of its global growth forecasts made just a few months earlier, reflecting the speed of the global downturn.

Strauss-Kahn told reporters that Asia needs to boost household demand to reduce its traditional reliance on exports to the United States and Europe, but such a shift would not happen overnight.

"It's impossible for Asia to have a recovery while the rest of the world is in bad shape," Strauss-Kahn said.

Most Asian economies are reliant on demand from the likes of the US and Europe, which are both mired in recession. In recent weeks, both South Korea and Japan, home to some of the world's top manufacturers, have reported record drops in exports. The IMF sees Asia growing just 2.7 percent this year, down from a November forecast of 4.9 percent.

"It's very uncertain. A worse outcome cannot be ruled out. There's some upside risk, but there's a lot of downside risk," Strauss-Kahn said.

Asia's economies are likely to grow at an average rate of more than 5 percent next year, with growth in some countries set to pick up quickly once the environment improves, he said.

China could still hit the government's target for 8 percent growth in gross domestic product this year, but this would be a big challenge, Strauss-Kahn said, adding that China was of "tremendous importance" to the world economy.

Strauss-Kahn reiterated that China's currency, the yuan, was undervalued but that the country's focus should be on economic recovery for the time being.

In its latest forecast, the IMF expects China's economy to expand by 6.7 percent this year, slowing sharply from 9 percent in 2008.

In a grim assessment of the world economy, the IMF last week slashed its 2009 forecast for global growth to a slight 0.5 percent, the weakest pace since World War II, from a November estimate of 2.2 percent.

The IMF also said yesterday that it had sharply downgraded its growth forecast for South Korea to a contraction of 4 percent from 2 percent growth this year.


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