IMF Says Despite Risks, Chinese Economy Is Normalizing

International Monetary Fund officials said in a blog discussing the economic impact of the coronavirus pandemic that there were some signals that the economy of China – the second largest in the world, was slowing getting back to normal after a full-blown shock because of the pandemic. However the IMF said there still were some risks to the economy.

The IMF officials noted that most of the larger Chinese companies had reopened and many of the employees staying locally had returned to work. However the officials also warned that the infections could return because of the resumption of national and international traveling.

They said that the Chinese economy could also be affected in its recovery path because of consumers and firms becoming wary of Chinese goods accentuated by the pandemic outbreaks in other countries and financial market gyrations.

The global economy has been plummeted by the coronavirus pandemic with more than 250,000 people being infected globally so far with more than 10,000 deaths. The IMF said that there will be a significant slowdown in the Chinese economy for the first quarter of this year which will leave an impact on its yearly performance.

“What started as a series of sudden stops in economic activity, quickly cascaded through the economy and morphed into a full-blown shock simultaneously impeding supply and demand,” the IMF blog said referring to very weak industrial production and retail sales data for the months of January and February.

The IMF however also noted that the response to the pandemic in shown by China so far indicated that the government had taken and followed the right policies which helped in combating the disease and in mitigating its impact even though those policies also were accompanied with tough economic tradeoffs.

The IMF said that it was necessary for Chinese policymakers to continue to take measures to support growth and for achieving financial stability if needed while also coordinating with the international community.

The the efforts of the Chinese authorities to mitigate the economic shock caused by the pandemic and in supporting the recovery, a large role needs to be played by fiscal policy, said Helge Berger, the IMF’s China mission chief and lead author of the blog.

According to a Reuters report on Thursday, the Chinese government is expected to announce fiscal stimulus worth trillions of yuan which would also be supported by as much as 2.8 trillion yuan ($395 billion) in local government bonds – all to spruce up the economy.

“While it is too early to speak about some of the proposals being discussed, it will be helpful to provide a mix of measures that is on-budget (and) well-targeted to help those most affected by the current crisis,” Berger told Reuters.

The Hubei province, from where the coronavius had originated, had been devastated by the strict constraints on movement at the height of the outbreak imposed by China, the blog said, but added that the measure had been curcial in slowing down the spread of the virus.

(Adapted from Reuters.com)



Categories: Creativity, Economy & Finance, Strategy, Sustainability, Uncategorized

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