The mainland will increasingly feel the pinch of the looming global recession with economic growth expected to slow more than previously forecast, according to Swiss investment bank UBS.
Adding to bearish projections by several other big brokerages, UBS said the financial meltdown in the United States meant China’s economy would grow 9.6 per cent this year instead of the 10 per cent the bank had forecast earlier.
The impact of the US-led financial crisis on the world’s fastest-growing economy would even be larger next year when GDP growth would slow to 8 per cent instead of the 8.8 per cent the brokerage had expected.
“I don’t think I am overly pessimistic,” UBS economist Wang Tao said yesterday. “Even at 8 per cent, growth is pretty good in a dire global recession.”
Asia’s economic outlook has deteriorated since the bankruptcy of century-old investment bank Lehman Brothers Holdings and the subsequent rescue of several European lenders.
UBS’ forecast on the mainland slowdown is not the most bearish. Credit Suisse cut its forecast to 9.3 per cent this year from 9.5 per cent and to 8.8 per cent next year from 9.2 per cent.
Goldman Sachs on September 26 cut its estimate to 9.8 per cent this year from 10.1 per cent and to 8.7 per cent next year from 9.5 per cent.
The brokerages all agree that a looming global recession will hurt appetite for mainland exports, resulting in an even faster slowdown in export growth.
Credit Suisse chief regional economist Tao Dong said sluggish growth in exports had spilled over into domestic consumption, an increasingly import-fed segment of the mainland economy.
“The softening in private consumption has surprised us,” he said, pointing to the sharp decline in retail sales growth of big-ticket items in August as the stock market tumbled.
Citigroup chief economist Huang Yiping, who has not revised his GDP forecast, said the mainland economy would still comfortably grow at 9.8 per cent this year after a 10.4 per cent expansion in the first half.
“The impact of the global financial crisis on China has become very visible,” Mr Huang said. “It affects the export sector, squeezes corporate profit margins and causes broader implications for the economy.”
Facing a gloomy outlook, Ms Wang of UBS bet that Beijing policymakers would roll out fiscal and monetarily friendly measures to spur consumer spending.
Fiscal policies such as lower tax and higher infrastructure investment by the government and monetary policies such as raising lending quotas were on the cards, she predicted.
Hong Kong, which relies virtually entirely on food and fuel imports, did not fare better in its outlook. JP Morgan economist Wang Qian warned the city would slip into a recession between this quarter and the first quarter of next year.
Its economy would grow 1.8 per cent next year, the slowest pace in 20 years compared with the average annual growth rate of 4.4 per cent.
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UBS Cuts Forecast of Mainland Growth to 9.6pc
Meltdown impact wider next year
Denise Tsang
7 October 2008
The mainland will increasingly feel the pinch of the looming global recession with economic growth expected to slow more than previously forecast, according to Swiss investment bank UBS.
Adding to bearish projections by several other big brokerages, UBS said the financial meltdown in the United States meant China’s economy would grow 9.6 per cent this year instead of the 10 per cent the bank had forecast earlier.
The impact of the US-led financial crisis on the world’s fastest-growing economy would even be larger next year when GDP growth would slow to 8 per cent instead of the 8.8 per cent the brokerage had expected.
“I don’t think I am overly pessimistic,” UBS economist Wang Tao said yesterday. “Even at 8 per cent, growth is pretty good in a dire global recession.”
Asia’s economic outlook has deteriorated since the bankruptcy of century-old investment bank Lehman Brothers Holdings and the subsequent rescue of several European lenders.
UBS’ forecast on the mainland slowdown is not the most bearish. Credit Suisse cut its forecast to 9.3 per cent this year from 9.5 per cent and to 8.8 per cent next year from 9.2 per cent.
Goldman Sachs on September 26 cut its estimate to 9.8 per cent this year from 10.1 per cent and to 8.7 per cent next year from 9.5 per cent.
The brokerages all agree that a looming global recession will hurt appetite for mainland exports, resulting in an even faster slowdown in export growth.
Credit Suisse chief regional economist Tao Dong said sluggish growth in exports had spilled over into domestic consumption, an increasingly import-fed segment of the mainland economy.
“The softening in private consumption has surprised us,” he said, pointing to the sharp decline in retail sales growth of big-ticket items in August as the stock market tumbled.
Citigroup chief economist Huang Yiping, who has not revised his GDP forecast, said the mainland economy would still comfortably grow at 9.8 per cent this year after a 10.4 per cent expansion in the first half.
“The impact of the global financial crisis on China has become very visible,” Mr Huang said. “It affects the export sector, squeezes corporate profit margins and causes broader implications for the economy.”
Facing a gloomy outlook, Ms Wang of UBS bet that Beijing policymakers would roll out fiscal and monetarily friendly measures to spur consumer spending.
Fiscal policies such as lower tax and higher infrastructure investment by the government and monetary policies such as raising lending quotas were on the cards, she predicted.
Hong Kong, which relies virtually entirely on food and fuel imports, did not fare better in its outlook. JP Morgan economist Wang Qian warned the city would slip into a recession between this quarter and the first quarter of next year.
Its economy would grow 1.8 per cent next year, the slowest pace in 20 years compared with the average annual growth rate of 4.4 per cent.
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