The International Monetary Fund (IMF) said on Wednesday that the economic growth in China is projected to slow to about 6.5 percent this year, half the 13 percent growth rate recorded pre-crisis in 2007 but still a strong performance given the global context.

IMF Managing Director Dominique Strauss-Kahn [CFP]

Two factors are helping sustain the momentum of China's economy "despite the collapse in exports," said the IMF in its latest World Economic Outlook report.

"First, the export sector is a smaller share of the economy, particularly after factoring in its high import content," said the IMF. "Second, the government has acted aggressively to provide major fiscal stimulus and monetary easing, which are helping boost consumption and infrastructure investment."

With trade comprising a smaller share of the economy, India, like China, is less exposed to the decline in global demand, said the IMF, which forecast that growth in India will decline sharply from more than 9 percent in 2007 to 4.5 percent in 2009.

"The slowdown is primarily a result of weaker investment, reflecting tighter financing conditions and a turn in the domestic credit cycle," said the IMF.

Growth projections for Asia as a whole have been marked down to varying degrees, in line with weaker global demand and tight external financial conditions and despite countercyclical macroeconomic policies, said the report.

IMF projects China 2009 growth at 6.5% [CFP]

"Activity in advanced Asia is expected to drop sharply, and some economies could even experience deflation," said the IMF. "Emerging Asia is expected to continue to grow, led by China and India."

"A modest recovery is projected in 2010, underpinned by a pickup in global growth and a boost from expansionary fiscal and monetary policies," said the IMF.

The IMF called for its members to take new policy stimulus, saying "there is scope to do more to bolster domestic demand in a number of economies that have fiscal room."

"In China, further measures to boost consumption would be helpful to rebalance the economy over the medium run as well as to offer short-term support," said the report.

There is also ample room for additional fiscal support in Singapore and Korea, said the IMF, warning that room to maneuver is more limited in economies such as India and the Philippines, which already have high levels of public debt.

(China Daily April 23, 2009)