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ADB pegs China GDP growth at 7%

By Wang Bo (China Daily)
Updated: 2009-04-01 08:07

The Asian Development Bank (ADB) yesterday marked down its forecast on China's year-on-year economic growth to 7 percent from 8.2 percent for this year, but said it could pick up to 8 percent next year with the country's "sound financial footing" and "necessary tools" at its disposal.

Related readings:  ADB: China's economic growth may dip to 7% this year  WB pegs GDP growth at 6.5%  China has potential to grow by 7%-8% annually in 2 decades  Wen: 8% GDP growth goal achievable

The bank's projection for this year is 1 percentage point lower than the Chinese government target of 8 percent growth, because the impact of the global financial crisis on the country is much worse than previously thought, the bank said in its latest Asian Development Outlook released yesterday.

The unfolding global financial turmoil has dragged China's year-on-year GDP growth down to 9 percent last year as a result of a sharp slowdown in industry and plummeting exports. The World Bank earlier forecast China's economic growth might dip to 6.5 percent this year due to the much weaker external demand and gloomier global economic outlook, while the Organization for Economic Cooperation and Development put it at a slower 6.3 percent in its report launched yesterday.

In the face of the deteriorating global economy, China has continued to put on steam, following its 4-trillion-yuan stimulus package unveiled last November to shore up the slowing economy, including the 850-billion-yuan investment in improving health care as well as the stimulus policies designed to revitalize key industries.

"China's launching of the fiscal stimulus package is timely and appropriate," said Robert Wihtol, ADB Country Director for China. The authorities have made it clear that more stimulus measures are in the pipeline if the economy continued to weaken in the second half.

"With the capacity to provide further fiscal stimulus if needed, the country's economic slowdown will be contained in the second half," he said.

The bank predicted China's consumer inflation would be around 0.8 percent this year, compared with 5.9 percent in 2008. It will provide the government with scope for more accommodative monetary policies to bolster the economy.

"Though China's CPI could fall into negative territory in the first quarter of this year, given the ample liquidity and robust lending growth, deflation may not be a major threat to the Chinese economy for the year as a whole," Zhuang Jian, senior economist, ADB, said.

The Manila-based bank put its projection on Asia's economic growth for 2009 at 3.4 percent, down from 6.3 percent last year. India, a major economy in South Asia, will grow at a slower pace of 5 percent this year, the bank said.