World Bank lowers China 2014 growth forecast to 7.4%

Updated: 2014-10-06 14:17


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SINGAPORE -- The World Bank said on Monday in Singapore that it has cut the growth target forecasts for China to 7.4 percent in 2014 and 7.2 percent in 2015, as China pushes forward structural reforms to address financial vulnerabilities and structural constraints.

"Measures to contain local government debt, curb shadow banking, and tackle excess capacity, high energy demand, and high pollution will reduce investment and manufacturing output," it said so regarding China's outlook.

But "China's slowdown in economy would be gradual; it's not the bottom falling out of China's growth." Stressed Sudhir Shetty, World Bank's Chief Economist in East Asia and Pacific Region, who added that the slowdown in economic growth of China will not have a dramatic impact on other countries.

However, it pointed out that if China experiences a sharp slowdown, which is unlikely to happen, it would hit commodity producers in the region, such as metal exporters in Mongolia and coal exporters in Indonesia, especially hard.

Overall, developing countries in East Asia Pacific will grow by 6.9 percent in 2014 and in 2015, down from the 7.1 percent rate the bank had previously forecast, and also a slowdown from 2013's 7.2 percent.

The bank also adjusted its 2016 growth forecast for the region from 7.1 percent to 6.8 percent.

Even though, it highlighted that Developing East Asia Pacific remains the fastest-growing region in the world.

Looking ahead, the bank said the best way for countries in the region to deal with risks is to address vulnerabilities and inefficiencies caused by an extended period of loose monetary policy and fiscal stimulus, and complement these measures with structural reforms to enhance export competitiveness.

Key reforms include infrastructure investment, logistics, and the liberalization of services and foreign direct investment, it pointed out.

Regarding the outlook of China, it said structural reforms in sectors such as state enterprises and services could help "offset the impact of measures to contain local government debt and curb shadow banking."

As to the property market, the bank said "a major nationwide correction in real estate prices in China remains unlikely, although there may be pressure on prices in several of the less rapidly growing provinces."