World Bank forecasts China recovery this year

April 7th, 2009 - 6:26 pm ICT by IANS  

Beijing, April 7 (Xinhua) A recovery in China, fuelled largely by the country’s huge economic stimulus package, is likely to begin this year, the World Bank (WB) said Tuesday in its mid-year report.
As countries in the East Asia and the Pacific region prepare for an expected surge in joblessness resulting from the global economic slowdown, a ray of hope may be emerging with signs of the Chinese economy bottoming out by mid-2009, said the report, which is a half-year assessment of the region’s economic health.

Vikram Nehru, the WB’s chief economist for the region, said that the forecast for China’s recovery is based on recent positive statistics such as loans, imports and purchase management index (PMI).

He emphasized that all forecast made under the current global financial crisis is uncertain, and more sure conclusion on China’s recovery still relies on further data in the coming months.

Chinese banks extended 2.69 trillion yuan ($393 billion) of loans in the first two months to fund the construction spree under the government’s 4-trillion yuan ($584.8 billion) stimulus package.

The Purchasing Managers’ Index (PMI) of China’s manufacturing sector rose for the fourth straight month in March to 52.4.

A PMI of above 50 suggests expansion, while one below 50 indicates contraction. Despite stronger growth driven by government stimulus package, there were also pessimistic signs in market-based investment, which threw more uncertainty on recovery of the Chinese economy, said Louis Kuijs, senior economist with the WB’s China Office.

The report, focusing on economic development of East Asia, forecast that real gross domestic product (GDP) growth in developing East Asia will reach only 5.4 percent in 2009, 1.3 percentage points lower than its previous forecast in December.

The bank defines developing East Asia as China, Indonesia, the Philippines, Thailand, Vietnam, Cambodia, Laos, Mongolia, Papua New Guinea and the island economies of the Pacific.

The report said the recovery of the Chinese economy will potentially contribute to the region’s stabilisation, and perhaps recovery.

But with China still heavily reliant on exports to world markets that continue to contract, the report warned that a truly sustainable recovery in the East Asia and Pacific region ultimately depends on developments in the advanced economies.

The bank in mid-March cut its forecast for China’s 2009 economic growth to 6.5 percent from 7.5 percent.

Nehru said China should focus on improving its economic structure while stimulating short-term GDP growth.

Shifting China’s output from exports to domestic needs will help provide immediate stimulus while laying the foundation for more sustainable growth in the future, he said.

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