The fiscal position is healthy and, even though the government has already introduced a package to stimulate demand, income tax cuts could also be considered. With headline inflation declining, monetary policy has scope to further offset the impact of the global downturn, following recent interest rate cuts. Lower inflation also provides an opportunity to realign energy prices with underlying costs; major hikes in electricity prices are required to alleviate shortages and stimulate much needed investment spending in the sector.
China: Growth slows
GDP growth has fallen, from a peak of nearly 12% to a pace in the high single digits. Export growth is weakening and, with slower capital formation, domestic demand is also projected to ease in 2009, before recovering in 2010. Disinflation is on course to continue, in part due to moderating commodity prices but also reflecting slower output growth.
Economic data
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