China's 2021 growth forecast lowered to 7.9% by International Monetary Fund

The International Monetary Fund has lowered its 2021 growth forecast for China to 7.9 percent as it says that the growth is still ‘unbalanced’ as the recovery from the pandemic has relied ‘heavily on public support while private consumption is lagging’. As per the report, the GDP growth is projected at 1.9 per cent in 2020 and 7.9 per cent in 2021, as economic activity continues to normalize and domestic outbreaks remain under control. Also, the core inflation is expected to remain subdued which leaves CPI inflation in 2020-21 below the pre-crisis target of about 3 per cent. 

The new report 

“The current account surplus is projected to widen to 1.9 percent of GDP in 2020 from 1.0 percent in 2019, before narrowing to below 1 percent in 2021”, says the report. The temporary increase this year reflects  lower commodity prices, the collapse in tourism and a surge in exports of pandemic-related and other goods. The structural reforms have also progressed despite the pandemic. However, they are not even across key areas. Various openings of the financial sector have also advanced with a shortening of the negative lists for foreign investment. 

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Factors like macroeconomics and financial policies have supported the recovery. Various policymakers have provided financial relief and fiscal support to protect the firms which were most affected. This was done to safeguard financial stability. Also, this will help in providing liquidity to the banking system, expanding re-lending facilities to smaller enterprises and introducing a repayment moratorium until Q1 2021.

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The Chinese authorities have also increased e disbursement and coverage of unemployment insurance to help vulnerable households. They have also provided tax reliefs and waived social security contributions by employers. Various reforms like the ‘hukou reforms’ improved labour mobility. Patent law was also amended to strengthen intellectual property protection.

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(Image Credits: Twitter/@IMFNews)