World Bank: "China's Excessive Tightening Could Disrupt Economic Recovery"

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The World Bank (WB) stated on the 23rd that China should maintain an accommodative monetary policy and avoid abrupt fiscal tightening to continue its economic recovery next year despite the impact of the novel coronavirus disease (COVID-19).

According to Bloomberg News, the WB projected China's gross domestic product (GDP) growth rates for this year and next year at 2% and 7.9%, respectively, in a report on the Chinese economy released that day, citing the resurgence of COVID-19 as the biggest economic risk factor.

It added that although China's fiscal deficit increased to about 5.9% of GDP by November this year, there is still room for the government to increase spending, urging more expenditure on social welfare and green investments.

Rather than attempting monetary tightening to curb rising real estate prices and speculation, the WB advised focusing on selective policy measures while maintaining an accommodative stance. The WB emphasized that "premature exit policies or excessive tightening could damage the economic recovery."

China's total debt rose to about 288% of GDP as of the end of the third quarter due to monetary and fiscal policies implemented in response to COVID-19. External debt was estimated to be about 20% of GDP.

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