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Difficult to return to 10% high growth in the short term The World Bank report pointed out that government-invested investments will strongly support growth in 2009. It is estimated that of the 7.2% growth rate, about 6 percentage points of growth comes from government-influenced spending and the stimulus from tax cuts.
However, Han Weisen, chief economist of the World Bank in China, said that since China's real economy has basically integrated into the world economy, China's dependence on government spending has increased to maintain rapid growth in the face of global economic downturn. At the same time, due to the excess capacity in many manufacturing sectors, corporate profit margins are squeezed, so market-based investment is expected to be weak for some time. The outlook for the real estate industry looks better, but consumption growth is unlikely to accelerate quickly. In general, before the recovery of the world economy, China's economy is unlikely to return to nearly 10% of high-speed growth.
There is no need to increase fiscal stimulus. The World Bank researchers said that according to the agency's forecast of economic trends, it may not be necessary or appropriate for China to add additional large-scale policy stimulus in 2009.
On the one hand, although the growth rate may not meet the government's target this year, considering the current global environment, China's economic growth will remain high under the boost of strong stimulus measures, and China is likely to avoid it. Malignant deflation or other major problems caused by the economic downturn. In addition, given the uncertainties in the global economic recovery, it is best to leave room for fiscal stimulus in 2010.
Annual deficit size or 5% of GDP
According to current trends, China's fiscal deficit in 2009 is likely to be significantly higher than the budget. In fiscal 2009, fiscal revenue increased by 8% and expenditure increased by 22%.
Although it is very difficult to predict the fiscal revenue at present, according to the agency's forecast of economic trends and the approximate estimation of the impact of the relevant policies throughout the year, the World Bank predicts that China's fiscal revenue this year will fall by 5%. And assuming a 22% increase in annual spending this year, in line with the budget, this means that the annual deficit will almost reach 5% of GDP.
The World Bank stresses that there are significant uncertainties in these forecasts. China’s fiscal position is good enough to cope with the rising deficit. However, these analyses emphasize that the addition of stimulus measures in 2009 may reduce the policy space for 2010.
Impossible to enter deflation Based on the judgment that the risk of malignant deflation in the world is low, it is unlikely that deflation will occur in China. But it must be noted that this pressure will continue to exist.
The World Bank pointed out that the risk of deflation can be reduced by taking certain measures. These include: raising the price of some of the administratively priced commodities at the appropriate time; and curbing excessive investment in certain industries that perform well in traditional growth models, but in the future they may perform due to changes in demand structure and relative prices. Will get worse.
At the same time, although there are concerns that the rapid growth of money and credit will lead to inflation, there are many excess capacity in China and the world, which will put downward pressure on product prices. At the same time, raw material prices will not rise sharply in the short term, so the overall price level It is unlikely to rise sharply in the near future.
The World Bank raised its GDP growth to 7.2% this year.
On June 18th, the World Bank released the latest issue of China's Economic Quarterly, which raised China's GDP growth forecast for 2009 to 7.2%. The agency stressed that China will still achieve remarkable economic growth this year and next year, but it is too early to say that the economy has begun to recover sustainably.