Slowing Growth, If Barely

China’s economy will slow to single digit growth this year, according to the latest forecast by the World Bank. But only barely so. The Bank still has GDP growth pegged to be 9.6%, down from the 10.8% it forecast last September.

That would be the slowest annual growth since 2002, but not unwelcome to Beijing which has been trying to cool the economy and let the air out of stock and property bubbles. China’s current account surplus, the broadest measure of trade, is forecast to fall to 9.3% of GDP this year from an estimated 11.0% in 2007. That, too, would be welcome to Beijing though how much that would register with U.S. voters in an American presidential election year is moot.

Less welcome news is that the Bank no longer expects the politically sensitive inflation to moderate as much. It has raised its forecast to 4.6%, up from its September forecast of 3.8% but still down from 2007’s 6.5%, the highest level in 11 years.

The Bank says the credit-crunch slowdown in the world economy is the reason for lowering its growth forecast, but the impact will be slight, and the government can easily offset it by opening up domestic demand. Similarly, the effects of the harsh winter on the economy will be negligible long-term, but will spike inflation in January and February.

Late last month, the Bank called for more reforms to public finances to tackle the consequences of years of fast growth including growing income inequality, reduced access to basic services and strain on the environment and natural resources.

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