ZCZC
BCN-07
ECONOMY-IMF-CHINA-GROWTH-ASIA
IMF lowers China 2019 growth forecast, citing trade war
BEIJING, Oct 9, 2018 (BSS/AFP) – The International Monetary Fund on
Tuesday lowered its forecast for Chinese economic growth in 2019, saying the
escalating trade war with the United States will drag on the world’s second-
largest economy.
The IMF’s latest World Economic Outlook predicted China’s economy would
grow 6.2 percent next year, down from an early forecast of 6.4 percent,
citing the “negative effect of recent tariff actions”.
Both of those figures would mark the slowest rate of expansion for China
since 1990, when growth shuddered in the aftermath of the violent suppression
of massive Tiananmen Square pro-democracy demonstrations the previous year.
But the IMF, which released its predictions for the world economic system
at its annual meeting in Bali, Indonesia, warned that China’s economy could
decelerate further if the trade conflict deepens.
“The forecast does not incorporate the impact of further tariffs on Chinese
and other imports threatened by the United States, but not yet implemented,
due to uncertainty about their exact magnitude, timing, and potential
retaliatory response,” the IMF said.
China’s rate of growth could decline by as much as a full percentage point
or more by 2019 if a “worst-case” scenario materialises, involving further
tariffs, a commensurate Chinese counter-response and a collapse in confidence
by businesses and markets.
While saying Chinese growth “remained strong”, the IMF added that Beijing
policymakers were navigating a “difficult trade-off between growth and
stability”.
China is trying to move away from its long-time reliance on heavy industry
and manufactured exports towards a growth model based more on domestic
consumption by its increasingly wealthy populace.
But the already tricky transition has been complicated by US President
Donald Trump’s use of import tariffs to punish China for what he considers
predatory trade practices.
The trade war has already forced China to moderate its own tough campaign
to crack down on excessive credit, initiated following growing warnings that
it was sitting on a debt time bomb.
It has recently taken a more accommodating stance to help buffer China’s
economy from the US trade measures.
The IMF warned Beijing not to completely shelve the debt clean-up and other
regulatory reforms, saying that could “encourage risk-taking, leading to a
further buildup of financial vulnerabilities”.
The IMF maintained a previous forecast for growth of 6.6 percent for 2018.
China’s economy grew 6.9 percent in 2017.
The fund also slightly lowered its forecast for Japan’s economy to 1.1
percent growth in 2018, down 0.1 of a percentage point from an April
estimate, but maintained a prediction for a 0.9 percent Japanese expansion in
2019.
Growth is expected to “remain strong elsewhere in emerging and developing
Asia”, the IMF said, forecasting Indian growth to increase to 7.3 percent in
2018 and 7.4 percent in 2019.
But it said the trade uncertainty would impact the ASEAN-5 — Indonesia,
Malaysia, the Philippines, Thailand, and Vietnam.
It maintained a 5.3 percent growth forecast for the Southeast countries in
2018, but lowered the 2019 estimate slightly to 5.2 percent.
BSS/AFP/MR/ 1054 hrs