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POLITICAL ECONOMY
IMF trims China 2012 growth forecast to 7.8%
by Staff Writers
Beijing (AFP) Oct 9, 2012


Top economies set for easing growth, except China: OECD
Paris (AFP) Oct 08, 2012 - The eurozone economy is slowing further, growth in the United States and Japan is moderating, but the outlook for soft growth in China might be improving, the OECD said on Monday.

The Organisaton for Economic Cooperation and Development said that on the basis of its index of leading indicators to the trend for growth, "most major economies will continue to see weakening growth in coming quarters."

The pointers indicated weakening growth in Germany, France, Italy and the eurozone as a whole, the OECD said.

The index for Britain and Brazil suggested that their economies were picking up.

The indicators for the United States and Japan "continue to show signs of moderating growth" and the indicators for Canada suggested "weak growth."

The OECD noted however that in China the indicators pointed to "soft growth, but tentative signs are emerging that the recent deterioration in the short-term outlook may have stabilised."

India and Russia seemed set for weak growth, the OECD said.

The International Monetary Fund on Tuesday cut its forecast for Chinese economic growth for this year and next, saying stimulus efforts have so far failed to deliver an expected boost.

In its latest World Economic Outlook the Fund also said that the slowdown in the world's number-two economy had impacted other countries in the region.

The Chinese economy was expected to grow 7.8 percent in 2012 and 8.2 percent in 2013, the IMF said.

Both figures are below the Fund's most recent estimates in July of 8.0 percent growth for 2012 and 8.5 percent for 2013. The July forecasts were in turn lower than an IMF estimate in April.

China's gross domestic product expanded 7.6 percent in the second quarter of this year, its worst performance in three years, and disappointing data since then has led to fears that third-quarter growth may have weakened further.

Third-quarter data is due out on October 18.

China has suffered the knock-on effect of a severe debt crisis in Europe and a hobbled recovery in the United States, its two key export markets, which have led to a slump in trade and contraction in manufacturing activity.

Authorities have moved to spur the economy by slashing interest rates twice in quick succession this year and cutting the amount of funds that banks must keep in reserve three times since December in a bid to encourage lending.

China had earlier tightened monetary policy in 2010-2011 during a run-up in inflation.

"The tightening of monetary and credit policies has been partly reversed in 2012, as price pressures have eased and the residential real estate market has cooled," the IMF said.

"This easing, however, has not yet gained the traction expected earlier in the year."

The IMF in July had predicted that the economy would rebound in the second half of this year as the pro-growth policies took effect.

Some analysts have speculated that any plans for a more substantive stimulus package have been delayed due to a coming Communist Party congress that opens on November 8 and will unveil a new top leadership line-up for the next decade.

The ruling party generally avoids big and bold policy moves in the run-up to key political events.

In its latest report, the IMF said China's economy should improve in 2013 "as domestic demand growth, especially investment growth, picks up with the policy easing now under way".

The IMF's revised outlook for China's 2012 growth is higher than the 7.5 percent the Chinese government has forecast.

Both, however, underscore the substantial weakening China has experienced after expanding 9.3 percent in 2011 and 10.4 percent in 2010.

China's GDP stood at $7.5 trillion in 2011.

The country's economic woes have also had a negative impact on Asia, the IMF said.

"Slowing growth in China has affected activity in the rest of Asia, a consequence of the deepening of linkages throughout the region in the past decade."

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