The World Bank has lowered its forecast for China’s economic growth in 2020 to 6.1% from the previous 6.2% in light of current levels of Sino-US trade tensions, reported Caixin.
“China’s immediate policy challenge is to manage disruptions caused by trade tensions with the United States without exacerbating domestic vulnerabilities,” the global development institution said in a report on world economic prospects, which made the forecast on the basis of there being no further escalation to trade tensions between the US and China.
In the short term, the Chinese government can leverage fiscal and monetary stimulus to cushion the impact of these risks, yet the stimulus could become ineffective over time, the World Bank said. The policy stimulus could also add to the debt burden of the already highly indebted corporate sector and contribute to rising household debt, it added.
The institution kept China’s projected economic growth for this year at 6.2%, unchanged from its previous forecast in January but well below China’s official 2018 figure of 6.6%, adding that fiscal and monetary policies helped balance the trade war impact.