BOFIT Weekly Review 2016/03
Chinese growth expected to slow moderately
The latest batch of economic forecasts for China shows general agreement on trends in the Chinese economy over the next few years. Most major forecasters expect economic growth to slow gradually this year and next, but still remain in the range of 6–7 %. While there have been no major changes in the forecasts in recent months, downside risks continue to emerge and increased uncertainty has made the economy much more difficult to manage. Amidst the new low-growth environment, economic structures still need balancing, indebtedness is increasing and state institutions are failing in many respects to keep up with market developments.
As fears about a possible “hard landing” of the Chinese economy rise, a number of forecasters have tried to estimate the effects of such a slowdown on the rest of the world. Most expect the hardest hit countries to be China’s neighbours, who constitute important export markets. Commodity-producing countries would also suffer from further weakness in demand and lower prices. The World Bank forecast suggests that a one percentage point slowdown in Chinese economic growth cuts one percentage point off GDP growth in Hong Kong and Singapore over the next two years and about 0.4 percentage point off growth in Indonesia, Malaysia and Thailand. UBS Bank calculates that a slowdown in China’s growth this year to 4 % would drive many countries in Eastern and Southeast Asia into recession.
Economic growth forecasts for China, %
