IMF boosts forecast for China growth to 10.5%
By Wang Yanlin |
July 9, 2010, Friday
|
Print Edition
Print Edition
The International Monetary Fund upgraded its forecast for China based on the country's better-than-expected performance in the first half.
The IMF said the global economy is recovering faster than expected but Europe's debt crisis might stall the rebound and governments need to shore up shaky public confidence.
The IMF raised its 2010 world growth forecast to 4.6 percent from its 4.2 percent prediction in April. But its latest report warned that "risks have risen sharply" and Europe has to quickly resolve debt problems and restore confidence in its banks.
The IMF's quarterly World Economic Outlook projected that China's economy will grow 10.5 percent on an annual basis this year, up 0.5 percentage point from the prediction it made in April.
It revised its projection for developing Asia to 9.2 percent for 2010 from 8.7 percent.
"Economic activity in Asia has been sustained by continued buoyancy in exports and private domestic demand," the report said.
"Exports have been boosted by the global and domestic inventory cycles and by recovery of final demand in some advanced economies. Private fixed investment has strengthened on the back of higher capacity utilization and the still relatively low cost of capital in the region."
The IMF projection is a bit more expansive than a recent one by the World Bank. The bank predicted last month China's growth would reach 9.5 percent this year and 8.5 percent in 2011.
Next week, China is scheduled to announce the key economic data for the year's first half and some economists said the growth may be moderated a bit from the surge of 11.9 percent in the first quarter, the fastest in more than two years.
Tao Dong, an economist at Credit Suisse, said China's growth is apt to slow down, with the pace standing around 9.5 percent in the coming quarters.
He said the major risk in the second half would come from the housing bubble.
According to the IMF report, the overall world economy may expand 4.6 percent in 2010, the biggest gain since 2007.
Rising risks
But it warned that uncertainties surrounding sovereign and financial-sector risks in parts of the euro zone could spread more widely, posing difficulties for both financial stability and the economic outlook.
"While we predict the recovery will continue, it is clear that downside risks have risen sharply," said Olivier Blanchard, the IMF's chief economist.
The Washington-based fund predicted the United States will grow 3.3 percent this year. It saw the euro zone edging up 1 percent amid the sovereign debt crisis.
"In the near term, the main risk is an escalation of financial stress and contagion, promoted by rising concern over sovereign risk," the report said.
"This could lead to additional increases in funding costs and weaker bank balance sheets, and hence to tighter lending conditions, declining business and consumer confidence, and abrupt changes in exchange rates."
The IMF said the global economy is recovering faster than expected but Europe's debt crisis might stall the rebound and governments need to shore up shaky public confidence.
The IMF raised its 2010 world growth forecast to 4.6 percent from its 4.2 percent prediction in April. But its latest report warned that "risks have risen sharply" and Europe has to quickly resolve debt problems and restore confidence in its banks.
The IMF's quarterly World Economic Outlook projected that China's economy will grow 10.5 percent on an annual basis this year, up 0.5 percentage point from the prediction it made in April.
It revised its projection for developing Asia to 9.2 percent for 2010 from 8.7 percent.
"Economic activity in Asia has been sustained by continued buoyancy in exports and private domestic demand," the report said.
"Exports have been boosted by the global and domestic inventory cycles and by recovery of final demand in some advanced economies. Private fixed investment has strengthened on the back of higher capacity utilization and the still relatively low cost of capital in the region."
The IMF projection is a bit more expansive than a recent one by the World Bank. The bank predicted last month China's growth would reach 9.5 percent this year and 8.5 percent in 2011.
Next week, China is scheduled to announce the key economic data for the year's first half and some economists said the growth may be moderated a bit from the surge of 11.9 percent in the first quarter, the fastest in more than two years.
Tao Dong, an economist at Credit Suisse, said China's growth is apt to slow down, with the pace standing around 9.5 percent in the coming quarters.
He said the major risk in the second half would come from the housing bubble.
According to the IMF report, the overall world economy may expand 4.6 percent in 2010, the biggest gain since 2007.
Rising risks
But it warned that uncertainties surrounding sovereign and financial-sector risks in parts of the euro zone could spread more widely, posing difficulties for both financial stability and the economic outlook.
"While we predict the recovery will continue, it is clear that downside risks have risen sharply," said Olivier Blanchard, the IMF's chief economist.
The Washington-based fund predicted the United States will grow 3.3 percent this year. It saw the euro zone edging up 1 percent amid the sovereign debt crisis.
"In the near term, the main risk is an escalation of financial stress and contagion, promoted by rising concern over sovereign risk," the report said.
"This could lead to additional increases in funding costs and weaker bank balance sheets, and hence to tighter lending conditions, declining business and consumer confidence, and abrupt changes in exchange rates."
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