China's annual economic growth may halve if crisis in Europe worsens: IMF

06 Feb 2012

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China's annual economic growth could be down to half this year if the European debt crisis worsens and drags the world economy into a recession, piling up pressure on Beijing to come out with ''significant'' fiscal stimulus, according to the International Monetary Fund (IMF).

The Fund outlined its central scenario for China's 2012 growth outlook in its global outlook in January, cutting its 2012 growth forecast from 9 per cent to 8.2 per cent.

"The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere," it said, adding, "In the unfortunate event such a downside scenario becomes reality, China should respond with a significant fiscal package, executed through central and local government budgets."

According to the China Economic Outlook, published today, under the IMF's "downside" forecast for the global economy, China's growth rate may be down 4 percentage points from the fund's current forecast of 8.2 per cent in 2012.

"In the unfortunate event such a downside scenario becomes reality, China should respond with a significant fiscal package, executed through central and local government budgets," it said.

Analysts say, among the stimulative measures would be cuts in consumption taxes, subsidies for consumers, corporate incentives for investment expansion, fiscal support for smaller firms and more additional spends on low-cost housing social safety nets, the fund said.

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