News & Reports News Year 2011 November , 2011 GDP growth forecast reduced

GDP growth forecast reduced

THE debt crisis in the eurozone and a falling domestic property market prompted another two huge financial institutions yesterday to cut their forecast of China's economic growth next year.

The gross domestic product in the world's second-largest economy may expand 8 percent in 2012 from a year earlier, down from a previous estimate of 8.3 percent, UBS AG said.Meanwhile, Citigroup Inc also lowered its forecast of China's economic growth next year to 8.4 percent from 8.7 percent.
"The much weaker eurozone growth will affect the rest of the world, including China," UBS economist Wang Tao said in a note. "We expect China's exports to decline in early 2012, and as a result of this, we cut the country's growth forecast."

Citigroup, on the other hand, viewed a correction in China's property sector may slow the economy's growth rate, along with the debt crisis in Europe and a possible third round of quantitative easing in the United States.

"We think a sharper deceleration in property investment is the biggest risk to China's economy," Citigroup's economist Johanna Chua said. "But a hard landing can be averted in the near term with sufficient policy flexibility to provide support for growth, especially on the fiscal front."
Last month, home prices fell in 33 of 70 Chinese cities tracked by the National Bureau of Statistics, and housing transactions declined 25 percent from the level in September.
Chua expected the central bank to cut the reserve requirement ratio, the amount of money that commercial banks set aside as reserves, before the Spring Festival in late January, and may raise interest rates to stabilize deposits if the recent capital outflows continue.
UBS's Wang said she estimated the central bank to raise its new lending target for 2012 to 8 trillion yuan (US$1.25 trillion) from 7.3 trillion to 7.4 trillion this year.China's economy grew 9.1 percent annually in the third quarter, slower than 9.5 percent in the second quarter and 9.7 percent in the first quarter.

Last Updated (Wednesday, 30 November 2011 14:42)