2010-07-22 13:48

Citigroup Inc cut its outlook for China's 2010 economic expansion by a percentage point, while also lowering its full-year global growth forecasts for 2010 and 2011, according to a strategy report.

China's gross domestic product growth forecast was cut to 9.5 percent, Citigroup's biggest one-month reduction in the country's outlook since late 2001, according to the report. Global GDP will increase by 3.7 percent this year and 3.3 percent in 2011, Citigroup said, trimming its previous forecasts by 0.1 percentage points each. The bank also cut its 2010 and 2011 forecasts for the US and emerging markets, while reducing Japan's outlook for next year.

"We have become somewhat less optimistic on near-term growth prospects," Citigroup said in a report led by Chief Economist Willem Buiter yesterday. "We think the more plausible risk is of an extended period of relatively sluggish industrial country growth over the next few years."

The Citigroup report came as Federal Reserve Chairman Ben S. Bernanke said yesterday the US economic outlook remains "unusually uncertain." Europe's debt crisis and China's steps to curb property prices have fueled concern that global economic growth will slow.

The bank said China will grow at an 8.8 percent rate next year, 0.5 percentage points lower than previously forecast, because the economy began to show more signs of weakness at the end of the second quarter, according to the report.

"Inflation is cooling along with the economy," Minggao Shen, head of China research at Citigroup, and Ken Peng, a Beijing-based economist, wrote in the China section of the report. "We downgrade our growth and inflation forecasts on much weaker momentum."

US forecast cut

Citigroup also forecast emerging markets may grow 6.6 percent this year and 5.8 percent in 2011, 0.2 and 0.1 percentage points lower than previously forecast. The US 2010 forecast was reduced by 0.4 percentage points, to 2.8 percent, and its 2011 outlook was reduced to 2.6 percent, from 2.8.

Japan's GDP will expand by 3.6 percent this year, 0.1 percentage points more than previously forecast, the report said. The country's growth in 2011 will be 1.9 percent, 0.2 percentage points slower than the previous forecast.