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World Bank lifts China GDP forecast
By Wang Yanlin |
June 19, 2009, Friday
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Print Edition
Print Edition
THE World Bank has raised its 2009 forecast for China's economic growth as a result of the boost from the government's stimulus efforts, saying that additional state spending is unnecessary until at least next year.
The country's expansionary fiscal and monetary policies have kept the economy growing "respectably," though it is too soon to say a sustained recovery is on the way, the Washington-based bank said yesterday.
The bank upgraded its estimate of this year's rise in China's gross domestic product to 7.2 percent from its 6.5 percent forecast in March and said the pace of growth may accelerate to 7.5 percent in 2010.
"Government-influenced investment will strongly support growth in 2009, and China can have the confidence to emphasize forward-looking policies and structural reforms," the World Bank said in its China Quarterly Update.
"We think it is not necessary or appropriate to add more traditional stimulus this year. One reason is that the fiscal deficit is likely to be significantly higher than budgeted and additional stimulus now reduces the room for stimulus in 2010."
China unveiled a 4 trillion yuan (US$586 billion) spending package last November, and the stimulus campaign has started to gain traction, leading to improvement in the country's industrial production and investment in recent months.
China managed a better-than-expected 6.1 percent growth in GDP in the first quarter on an annual basis. The country targeted an expansion of 8 percent for the whole year, even though it is still reeling from the effects of the global recession. China's export sector continued its contraction in May, falling 26.4 percent and posting the worst performance in at least 14 years.
"Growth in China should remain respectable this year and next, although it is too early to say a robust sustained recovery is on the way," said Ardo Hansson, the bank's lead economist in China. "However, there are limits to how much and how long China's growth can diverge from global growth based on government-influenced spending."
The report said China's market-based investment is likely to continue to lag for a while because of excess capacity in many manufacturing sectors. Prospects for real estate activity appear reasonably good, but consumption is unlikely to pick up speed, it said.
"China's growth is not likely to rebound to very high single-digit rates before the world economy recovers convincingly," the report said.
Premier Wen Jiabao said on Wednesday that China's economy is at a critical point as it begins to recover steadily. He said the government should continue its "proactive fiscal policy and moderately relaxed monetary policy."
The World Bank indicated that China needs more growth from domestic demand - consumption in particular - as a result of the falloff in exports brought by the global downturn.
The transition to more "consumption-led, service sector-oriented and labor-intensive growth requires policy adjustments," the report said. It advised China to "help channel resources to sectors that will grow in the new setting instead of to sectors that have traditionally been favored and done well, (and to) support thriving domestic markets and successful, permanent urbanization."
"Such reforms can be pursued more successfully if flanked by a well-functioning public finance system and social safety net," it added.
The country's expansionary fiscal and monetary policies have kept the economy growing "respectably," though it is too soon to say a sustained recovery is on the way, the Washington-based bank said yesterday.
The bank upgraded its estimate of this year's rise in China's gross domestic product to 7.2 percent from its 6.5 percent forecast in March and said the pace of growth may accelerate to 7.5 percent in 2010.
"Government-influenced investment will strongly support growth in 2009, and China can have the confidence to emphasize forward-looking policies and structural reforms," the World Bank said in its China Quarterly Update.
"We think it is not necessary or appropriate to add more traditional stimulus this year. One reason is that the fiscal deficit is likely to be significantly higher than budgeted and additional stimulus now reduces the room for stimulus in 2010."
China unveiled a 4 trillion yuan (US$586 billion) spending package last November, and the stimulus campaign has started to gain traction, leading to improvement in the country's industrial production and investment in recent months.
China managed a better-than-expected 6.1 percent growth in GDP in the first quarter on an annual basis. The country targeted an expansion of 8 percent for the whole year, even though it is still reeling from the effects of the global recession. China's export sector continued its contraction in May, falling 26.4 percent and posting the worst performance in at least 14 years.
"Growth in China should remain respectable this year and next, although it is too early to say a robust sustained recovery is on the way," said Ardo Hansson, the bank's lead economist in China. "However, there are limits to how much and how long China's growth can diverge from global growth based on government-influenced spending."
The report said China's market-based investment is likely to continue to lag for a while because of excess capacity in many manufacturing sectors. Prospects for real estate activity appear reasonably good, but consumption is unlikely to pick up speed, it said.
"China's growth is not likely to rebound to very high single-digit rates before the world economy recovers convincingly," the report said.
Premier Wen Jiabao said on Wednesday that China's economy is at a critical point as it begins to recover steadily. He said the government should continue its "proactive fiscal policy and moderately relaxed monetary policy."
The World Bank indicated that China needs more growth from domestic demand - consumption in particular - as a result of the falloff in exports brought by the global downturn.
The transition to more "consumption-led, service sector-oriented and labor-intensive growth requires policy adjustments," the report said. It advised China to "help channel resources to sectors that will grow in the new setting instead of to sectors that have traditionally been favored and done well, (and to) support thriving domestic markets and successful, permanent urbanization."
"Such reforms can be pursued more successfully if flanked by a well-functioning public finance system and social safety net," it added.
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