Growth forecast for China cut over continuing eurozone crisis
Source: Agencies |
November 28, 2012, Wednesday
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Print Edition
Print Edition
THE Organization for Economic Co-operation and Development cut its growth forecast for China's economy yesterday, citing a still-unresolved eurozone crisis that could mute demand for Chinese exports for months to come.
Although the world's second largest economy is emerging from its worst sequence of slowing growth in three years, and rising property and infrastructure investment is pointing to a rebound expected to last to 2014, the OECD cautioned that exports would remain a weak spot.
Underscoring the risks to growth, the OECD, which has 34 members, lowered its growth forecast for China to 8.5 percent next year, down from a 9.3 percent prediction in May.
The Chinese economy should grow 7.5 percent this year, the Paris-based group said in its latest report on the global economic outlook, with growth cresting at 8.9 percent in 2014.
"The economy will still face external headwinds," the OECD said. "By past standards, export growth is set to remain subdued."
Growth in exports should not exceed 9 percent over the next two years, the group said, a sharp slowdown from the past decade when annual growth averaged around 22 percent.
If the crisis in the eurozone - the biggest buyer of Chinese exports - gets worse, China's gross domestic product growth would likely slip 0.6 percentage points next year, and 1.3 percentage points in 2014, the OECD said.
"The OECD as a whole would move into recession," said the report from the policy think-tank to the world's richest countries and its most influential emerging economies. "China and other emerging market economies would not be immune from this shock."
As it is, China's jobless rate - around 4.1-4.3 percent - remains high, especially in urban areas, the OECD said, with a "rapidly increasing number" of graduates struggling to find jobs.
Still, the OECD noted that China has scope to further loosen monetary and fiscal policies if necessary to boost growth.
China cut interest rates twice in the space of four weeks earlier this year, reducing one-year borrowing rates to 6 percent, though that leaves them way above near-zero rates in major developed nations.
The country's fiscal deficit is also projected to stand at a healthy 2 percent this year and 2.2 percent in 2013, well below an OECD average of 4.6 percent for 2013.
For now, the fast-tracking of infrastructure spending by the government and higher public housing investment is putting a floor beneath China's economic growth, the group said.
Chinese demand for housing is also starting to improve again, it said, and banks have started lowering mortgage rates for first-time buyers, further boosting sentiment.
This, combined with rising wages, supported retail sales in the first nine months of the year, the OECD said.
"For the first time in about a decade, consumption is set to contribute more to growth this year than capital formation."
Although the world's second largest economy is emerging from its worst sequence of slowing growth in three years, and rising property and infrastructure investment is pointing to a rebound expected to last to 2014, the OECD cautioned that exports would remain a weak spot.
Underscoring the risks to growth, the OECD, which has 34 members, lowered its growth forecast for China to 8.5 percent next year, down from a 9.3 percent prediction in May.
The Chinese economy should grow 7.5 percent this year, the Paris-based group said in its latest report on the global economic outlook, with growth cresting at 8.9 percent in 2014.
"The economy will still face external headwinds," the OECD said. "By past standards, export growth is set to remain subdued."
Growth in exports should not exceed 9 percent over the next two years, the group said, a sharp slowdown from the past decade when annual growth averaged around 22 percent.
If the crisis in the eurozone - the biggest buyer of Chinese exports - gets worse, China's gross domestic product growth would likely slip 0.6 percentage points next year, and 1.3 percentage points in 2014, the OECD said.
"The OECD as a whole would move into recession," said the report from the policy think-tank to the world's richest countries and its most influential emerging economies. "China and other emerging market economies would not be immune from this shock."
As it is, China's jobless rate - around 4.1-4.3 percent - remains high, especially in urban areas, the OECD said, with a "rapidly increasing number" of graduates struggling to find jobs.
Still, the OECD noted that China has scope to further loosen monetary and fiscal policies if necessary to boost growth.
China cut interest rates twice in the space of four weeks earlier this year, reducing one-year borrowing rates to 6 percent, though that leaves them way above near-zero rates in major developed nations.
The country's fiscal deficit is also projected to stand at a healthy 2 percent this year and 2.2 percent in 2013, well below an OECD average of 4.6 percent for 2013.
For now, the fast-tracking of infrastructure spending by the government and higher public housing investment is putting a floor beneath China's economic growth, the group said.
Chinese demand for housing is also starting to improve again, it said, and banks have started lowering mortgage rates for first-time buyers, further boosting sentiment.
This, combined with rising wages, supported retail sales in the first nine months of the year, the OECD said.
"For the first time in about a decade, consumption is set to contribute more to growth this year than capital formation."
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