Thursday November 19, 10:18 AM
OECD sees strong growth, low inflation in China
PARIS, Nov 19 (Reuters) - Following is a summary of what the
Paris-based Organisation for Economic Co-operation and
Development had to say about non-members Brazil, India, China and
Russia in its semi-annual Economic Outlook released on Thursday.
CHINA
2008 2009 2010 2011
GDP 9.0 8.3 10.2 9.3
INFLATION (CPI (NYSE: CPY - news) ) 5.9 -1.1 0.1 1.0
CURRENT ACCOUNT (pct of GDP) 9.8 6.4 5.4 5.9
FISCAL BALANCE (pct of GDP) 1.1 -1.8 -0.9 -0.3
In its previous forecast on June 24, the OECD had projected
GDP growth of 7.7 percent this year and 9.3 percent in 2010.
Upgrading its outlook, it said domestic demand was set to
remain strong thanks to highly stimulative economic policies and
buoyant consumption spurred by improving employment prospects.
Fiscal stimulus has not endangered the sustainability of
China's public finances. Indeed, the OECD expects net government
debt to be 'very low' when stimulus is withdrawn in 2011.
Whereas the government can afford to keep spending at higher
levels, credit growth will need to be reined in to avert a new
crop of bad loans, the report said.
INDIA
2008 2009 2010 2011
GDP 6.1 6.1 7.3 7.6
INFLATION (WPI) 8.4 3.5 7.0 6.2
CURRENT ACCOUNT (pct of GDP) -2.5 -1.9 -2.0 -1.8
FISCAL BALANCE (pct of GDP) -8.8 -10.1 -9.0 -8.1
The OECD had been forecasting GDP growth for India of 5.9
percent in 2009 and 7.2 percent in 2010.
With inflation re-emerging, due to various supply factors,
policymakers will need to ensure a timely withdrawal of stimulus.
'Given the magnitude of the easing and the speed at which
inflation has bounced back, monetary policy will need to be
tightened fairly soon,' the report said.
Reining in the budget deficit will be tough because of its
size and the permanent nature of recent increases in spending.
Higher financing costs, exacerbated by heavy government
borrowing, will be a drag on investment and keep economic growth
just below pre-crisis rates.
RUSSIA
2008 2009 2010 2011
GDP 5.6 -8.7 4.9 4.2
INFLATION (period average) 14.1 11.7 6.9 7.0
CURRENT ACCOUNT (pct of GDP) 6.0 3.6 4.1 2.5
FISCAL BALANCE (pct of GDP) 4.8 -6.7 -6.0 -3.0
The OECD had previously forecast a contraction of 6.8 percent
for Russia in 2009 and growth of 3.7 percent in 2010.
'Although recovery is in prospect, the large output gap and
subdued inflation suggest that policy stimulus should not be
removed too hastily,' the OECD said.
By contrast, discriminatory trade measures to protect
domestic industries during the crisis are counter-productive and
should be unwound as quickly as possible.
'Also, the high concentration of assets and deposits in a few
state-owned banks was a natural consequence of the crisis, but is
not healthy for the long-run development of the banking system.'
The OECD said consumer and investor confidence is still
fragile and closely tied to the oil price, which holds the key to
the direction of capital flows, credit growth and asset prices.
BRAZIL
2008 2009 2010 2011
GDP 5.1 0.0 4.8 4.5
INFLATION (CPI, year-end) 5.9 4.2 4.4 4.5
CURRENT ACCOUNT (pct of GDP) -1.8 -1.4 -1.9 -2.2
FISCAL BALANCE (pct of GDP) -2.0 -3.5 -1.7 -1.8
In its previous forecasts, the OECD projected that Brazil's
GDP would shrink 0.8 percent this year and grow 4.0 percent in
2010.
'A judiciously planned withdrawal of policy stimulus would be
advisable from early 2010, if the recovery is well in hand, as
expected,' the report said.
The inflation outlook is benign, but a gradual tightening of
monetary policy might be in order from mid-2010 to prevent price
pressures arising from rapidly diminishing slack in the economy.
Brazil's debt dynamics are sustainable, even though the ratio
of public debt to GDP has been trending higher, the OECD added.
(Reporting by Alan Wheatley; Editing by Tomasz Janowski)
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