IMF optimistic in forecast for China, world
Global economists updated China’s economic outlook this week given the new COVID-19 situation and effects of policy support, and expect a sustainable and more balanced recovery this year.
China’s economy is projected to grow by 8.1 percent this year, built on its effective pandemic containment measures and policy support, according to the International Monetary Fund in its World Economic Outlook update released on Tuesday.
“China has been very successful in containing the pandemic, and that has played a very important role to bring back activity much more quickly,” said Gita Gopinath, economic counselor and director of IMF’s research department, during a virtual news conference on Tuesday.
Although the updated projection was 0.1 percentage point down from that in October, it is higher than the 7.9 percent forecast that the World Bank made on Jan 5.
Economic recovery in China was “ahead of all large economies”, wrote Gopinath in a blog post. She called on the international community to act swiftly to ensure rapid and broad global access to vaccinations and therapeutics, maintain targeted economic lifelines to households and firms, ensure financial stability, and help poorer nations combat the crisis.
Data from the National Bureau of Statistics showed that China’s full-year GDP growth rate last year achieved 2.3 percent on a yearly basis, and the rate rebounded to 6.5 percent in the fourth quarter mainly driven by strong exports and manufacturing production.
Malhar Nabar, a division chief at the IMF’s research department, said that the public infrastructure-spending support, and also the support that was extended to affected households and to firms, was reinforced by aggressive actions by the People’s Bank of China, or the central bank, to provide liquidity support and ensure that credit provision remains strong.
During a virtual World Economic Forum panel discussion on Tuesday, PBOC Governor Yi Gang said that China will not shift suddenly from its supportive monetary measures, and the monetary policy will continue to “prop up the economy”.
The central bank will keep a balance between supporting the economic recovery and preventing risks, such as rising macro leverage ratio and higher nonperforming loans.
“We will ensure that policy is consistent and stable and will not exit from supporting policy prematurely,” Yi said.
He added that the country’s monetary and fiscal policy will focus on maximizing employment, and the authorities are taking measures to boost the contribution of consumption to the economy.
China’s real GDP is now back to its pre-COVID trend after the remarkable recovery last year, and some increased virus cases in January may have limited impact on the overall economy, although uncertainty remains, said Shan Hui, chief China economist at Goldman Sachs.
The US brokerage firm kept its forecast of China’s economic growth at a rate of 8 percent for this year, 6.6 percent for the United States, and 6.5 percent for the whole world.
“Most of the credit slowdown that we expect from 2020 to 2021 has already taken place,” said Shan in an interview with China Daily on Wednesday. “We do not expect further declines in total social financing stock growth in sequential terms from here.” She added that this is especially so after government officials have repeatedly emphasized “policy continuity “and “no policy cliff” in recent weeks.
Shan expected China’s monetary policy stance to stay neutral this year, with a more structural tilt to support policy priorities, such as lending to small and medium-sized enterprises, rural development, and green financing.
In the updated report, the IMF revised its projection of world economic growth to 5.5 percent this year, compared to 5.2 percent in its October forecast, thanks to stronger than expected recovery in the past six months, the policy support since the end of last year, and vaccination efforts.
But the IMF indicated that global growth is likely to moderate to 4.2 percent next year.
Gopinath noted that even though the estimated collapse of the world economy is somewhat less dire than previously projected－owing to stronger than expected growth in the second half of last year－it remains the worst peacetime global contraction since the Great Depression of the 1930s.
IMF stated that emerging markets and developing countries are also projected to trace diverging recovering paths, just like among the advanced economies.
“Considerable differentiation is expected between China－where effective containment measures, a forceful public investment response, and central bank liquidity support have facilitated a strong recovery－and other economies,” wrote the IMF in its report.
Source: China Daily