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World Bank cuts China GDP outlook
By Fu Chenghao |
March 19, 2009, Thursday
|
Print Edition
Print Edition
THE World Bank trimmed its forecast for China's 2009 growth from 7.5 percent to 6.5 percent yesterday as a result of falling exports but expressed confidence in the government's ability to keep the world's third-largest economy expanding amid the global downturn.
The drop in trade will hurt investment and job creation, the bank said in a quarterly report assessing the Chinese economy.
But it also said the nation is likely to continue to outgrow most other countries as Chinese banks have been largely unscathed by the international financial turmoil and the economy still has plenty of room for forceful stimulus measures.
"China is a relative bright spot in an otherwise gloomy global economy," said David Dollar, the bank's country director for China. "Shifting China's output from exports to domestic needs helps to provide immediate stimulus while laying the foundation for more sustainable growth in the future."
Yesterday's report was the second time in four months that the Washington-based World Bank has cut its growth forecast for China's 2009 gross domestic product, following a reduction in November from 9.2 percent to 7.5 percent. Growth at 6.5 percent would be the weakest since 1990's 3.8 percent and below the 7.6 percent reported in 1999. China's exports have been hit badly by the intensifying global crisis, and this was bound to contain China's growth in 2009 and 2010, the bank said.
China's exports fell 25.7 percent year on year in February after January's 17.5 percent plunge, the worst performance in a decade. February imports slumped 24.1 percent.
Premier Wen Jiabao said last week that achieving the government's 8 percent economic growth target this year would be difficult but possible, adding that the government could add stimulus measures at any time on top of the 4-trillion-yuan (US$585 billion) package announced in November.
"There have at least been early signs of stabilization, although, given the international weakness, it is too early to expect a sustained rebound," the World Bank report said. "China's growth can only rebound significantly and sustainably if the world economy recovers, and this does not seem likely to happen soon."
Still, if another stimulus comes, China should focus more on boosting consumption, job creation and social programs to rebalance the economy from capital-intensive industrial investment, making growth more sustainable and of higher quality, said Louis Kuijs, the bank's senior economist and the report's main author.
November's stimulus package mainly supports railways, pipelines and other public works.
"Somewhat lower growth is not likely to jeopardize China's economy or social stability, especially not if the adverse consequences of the downturn for employment and people's livelihoods can be limited through the social safety net, preferably combined with education and training," Kuijs said.
Private-sector economists have forecast China's 2009 GDP growth in a range from 5 to 8 percent.
The World Bank report also said China's central bank has further scope for expansionary monetary policy. As deflation is a potential risk, China could cut interest rates and remove price controls for industrial inputs such as energy.
The drop in trade will hurt investment and job creation, the bank said in a quarterly report assessing the Chinese economy.
But it also said the nation is likely to continue to outgrow most other countries as Chinese banks have been largely unscathed by the international financial turmoil and the economy still has plenty of room for forceful stimulus measures.
"China is a relative bright spot in an otherwise gloomy global economy," said David Dollar, the bank's country director for China. "Shifting China's output from exports to domestic needs helps to provide immediate stimulus while laying the foundation for more sustainable growth in the future."
Yesterday's report was the second time in four months that the Washington-based World Bank has cut its growth forecast for China's 2009 gross domestic product, following a reduction in November from 9.2 percent to 7.5 percent. Growth at 6.5 percent would be the weakest since 1990's 3.8 percent and below the 7.6 percent reported in 1999. China's exports have been hit badly by the intensifying global crisis, and this was bound to contain China's growth in 2009 and 2010, the bank said.
China's exports fell 25.7 percent year on year in February after January's 17.5 percent plunge, the worst performance in a decade. February imports slumped 24.1 percent.
Premier Wen Jiabao said last week that achieving the government's 8 percent economic growth target this year would be difficult but possible, adding that the government could add stimulus measures at any time on top of the 4-trillion-yuan (US$585 billion) package announced in November.
"There have at least been early signs of stabilization, although, given the international weakness, it is too early to expect a sustained rebound," the World Bank report said. "China's growth can only rebound significantly and sustainably if the world economy recovers, and this does not seem likely to happen soon."
Still, if another stimulus comes, China should focus more on boosting consumption, job creation and social programs to rebalance the economy from capital-intensive industrial investment, making growth more sustainable and of higher quality, said Louis Kuijs, the bank's senior economist and the report's main author.
November's stimulus package mainly supports railways, pipelines and other public works.
"Somewhat lower growth is not likely to jeopardize China's economy or social stability, especially not if the adverse consequences of the downturn for employment and people's livelihoods can be limited through the social safety net, preferably combined with education and training," Kuijs said.
Private-sector economists have forecast China's 2009 GDP growth in a range from 5 to 8 percent.
The World Bank report also said China's central bank has further scope for expansionary monetary policy. As deflation is a potential risk, China could cut interest rates and remove price controls for industrial inputs such as energy.
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