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6 Oct, 2014 13:53

World Bank cuts China’s growth forecast

World Bank cuts China’s growth forecast

The ​World Bank has cut its growth forecast for China for the next two years as world’s second largest economy faces tighter global monetary conditions.

China will expand 7.4 percent this year and 7.2 percent next year, compared with previous World Bank forecasts of 7.6 percent and 7.5 percent. Even so it will remain the fastest-growing developing country in the world.

screenshot from: World Bank East Asia and Pacific economic update October 2014

China's slowdown was mostly due to the country's massive expenditure on reforms to address financial vulnerabilities and structural constraints, and place the economy on a more sustainable growth path, the report said.

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,” the World Bank said.

However it added that the efficiency of China’s economy would be improved by relaxing the entry of private firms into sectors previously reserved for state enterprises; improving the governance of state enterprises, and tightening their performance standards, including financial performance.

Growth in developing East Asia and Pacific (EAP) will moderate from 7.2 percent in 2013 to 6.9 percent in 2014–15.

Excluding China, growth in developing countries in the region is expected to bottom out at 4.8 percent this year, before rising to 5.3 percent in 2015, as exports rise and domestic economic reforms advance in the larger Southeast Asian economies.

Ruslan Aymalov, Business RT