Fitch Ratings trims China's 2012 growth forecast to 7.8%

28 September 2012 08:15  [Source: ICIS news]

SINGAPORE (ICIS)--Fitch Ratings on Friday trimmed its growth forecast for China to 7.8% this year, down from a previous estimate of 8% made in June, amid expectations of a further deterioration in the global economy.

However, it does not expect China to face a hard landing – a much sharper growth drop – despite the slowdown in the April-June period of this year, the ratings firm said in its September global economic report.

China’s economy grew by 7.6% in the second quarter of this year, compared with the 9.3% growth seen in the same period in 2011.

“Fitch does not expect such an outcome. Rather the most likely triggers for such a scenario would come from a much deeper downturn in either the labour or property market than currently expected,” it said.

The current slowdown in the Chinese economy is less abrupt than in 2009 when the labour market weakened abruptly, Fitch said.

“However, corporate profitability has weakened giving rise to a risk that companies may eventually hit a pain threshold at which they would start to shed workers. Fitch expects the authorities are likely to implement more aggressive stimulus at such a stage,” it added.

The ratings firm said that it does not expect China to seek to boost its economic growth “through more substantial currency depreciation for fear of provoking retaliation from trade partners, unless there is a severe negative global shock”.

China’s yuan currency has depreciated by around 1% against the US dollar since end-April this year, it added.

Fitch expects some “modest quasi-fiscal stimulus” to raise China’s growth towards 8% by the end of 2012 and to support growth of about 8.2% next year.

Fitch expects growth in Brazil and India to accelerate in 2013 and reach 4.2% and 7%, respectively, after a “cyclical trough” in 2012, while Russia will see steady growth rates about 3.5% in 2012-2013.

By: Nurluqman Suratman

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