| World Bank raises China GDP forecast to 7.2 percent |
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| Sunday,June 21,2009 Posted: 23:51 BJT(51 GMT) |
| From:Xinhua Article type:Reproduced |
China's fiscal stimulus package would help the country's economy grow faster than expected this year but it would be premature to say a sustained recovery was under way, the World Bank said on Thursday.
The World Bank raised its year-on-year gross domestic product growth forecast for China to 7.2 per cent for 2009, saying the apparent success of the government's Rmb4,000bn ($586bn) rescue package had improved the economy's outlook since March, when the bank predicted 6.5 per cent growth this year.
It warned, however, that Beijing might have little room for more stimulus measures.
“Government-influenced investment will strongly support growth in 2009. However, there are limits to how much and how long China's growth can diverge from global growth based on government influenced spending,” said Ardo Hansson, the World Bank lead economist for China. “It is too early to say a robust sustained recovery is on the way.”
With government revenues falling and expenditure rising rapidly, the Bank predicts China's fiscal deficit will rise to almost 5 per cent of GDP this year, well above the 3 per cent of GDP budgeted by Beijing and a large jump from last year's deficit of 0.4 per cent of GDP.
“On current projections it is not necessary and probably not appropriate to add more traditional stimulus in 2009,” said Louis Kuijs, senior economist and main author of the World Bank update. “One reason is that the fiscal deficit is on course to be significantly higher than budgeted this year and additional stimulus now would reduce the room for stimulus in 2010.”
China's economy grew 6.1 per cent year-on-year in the first quarter of this year, well below the official full-year target of 8 per cent but faster than any other major country.
The World Bank said it expected China's economy to grow 7.7 per cent in 2010, a much slower pace than the 12 per cent in 2007 and still below the 9 per cent rate of last year.
But market-based investment and consumption were unlikely to rebound until the rest of the world started to recover convincingly and the collapse in Chinese exports was reversed, it added.
The Bank estimated a full 6 percentage points of this year's 7.2 per cent GDP growth would come from investment and spending either carried out by the government or directly influenced by it.
“Market-based investment may remain subdued for a while, particularly in manufacturing, where foreign sales make up between one-fourth and one-third of the total,” the Bank's report said.
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