IMF Trims China GDP Forecast to 5.6%, Expects Normal Growth by Second Quarter
Zhou Ailin | Chen Ting
DATE:  Feb 25 2020
/ SOURCE:  yicai
IMF Trims China GDP Forecast to 5.6%, Expects Normal Growth by Second Quarter IMF Trims China GDP Forecast to 5.6%, Expects Normal Growth by Second Quarter

(Yicai Global) Feb. 24 -- The International Monetary Fund has cut its forecast for China's gross domestic product growth to 5.6 percent this year from 6 percent because of the disruption caused by the novel coronavirus epidemic.

Due to the strong measures being taken by the Chinese government to contain the disease, the IMF expects the country's economy to return to normal in the second quarter, Managing Director Kristalina Georgieva said at the G20 Finance Ministers' Meeting on Feb. 22.

"The Chinese authorities are working to mitigate the negative impact of the Covid-19 virus on the economy with crisis measures, liquidity provision, fiscal measures and financial support," Georgieva said. The IMF fully supports the measures, she added.

The Washington-based organization also trimmed its outlook for global economic expansion this year by 0.1 point to 3.2 percent. But according to its baseline scenario and if policies already announced are implemented, the impact is expected to be minor and short-lived, she added.

On Jan. 20, the IMF had raised its expectation for China's growth this year by 0.2 point to 6 percent as trade tensions with the US eased. It also had lowered its global growth forecast 0.1 point to 3.3 percent and had dropped next year's 0.2 point to 3.4 percent.

Standard Chartered Bank has cut its China GDP forecast 0.3 point to 5.5 percent for 2020, the London-based lender said on Feb. 19. The bank cut its first-quarter expectation to 2.8 percent from 4.5 percent, while a rebound in the second and third quarters should see annual growth recover, it added.

Chinese government debt will rise to 3 percent from 2.8 percent last year, Ding Shuang, Standard Chartered's chief economist for Greater China and North Asia, told Yicai Global.

Local government special bonds will jump to around CNY3 trillion (USD426.7 billion) from CNY2.2 trillion (USD312.8 billion), he said. China has introduced fiscal and tax support measures to help small and medium-sized companies get through the epidemic.

China's central bank will continue to promote the loan prime rate, which was introduced last year to increase the role of market forces in helping lenders set interest rates, Liu Guoqiang, deputy governor of the People's Bank of China, said on Feb. 22.

The PBOC will keep the benchmark deposit rate as a ballast stone for the country's interest rate system in the long term, he added. It will look at the fundamentals of economic growth and price levels and will adjust rates in a timely and appropriate manner.

Editors: Dou Shicong, Kim Taylor

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Keywords:   IMF,novel coronavirus