IMF also downgrades prospects for global economy because of euro crisis

BEIJING - The International Monetary Fund (IMF) has cut its forecast for China's 2012 economic growth to 8.25 percent from the 9 percent projected in September, and it warned that exports would be a significant drag on expansion in the coming two years.

The IMF has downgraded the prospects for global economic growth in 2012 to 3.25 percent from 4 percent, largely because the eurozone economy is expected to go into a recession this year.

"The risks to China from Europe are large and tangible," said Murtaza Syed, resident representative of the IMF's Beijing office, at a seminar on Monday.

China's economic growth, which came in at 9.2 percent last year, could fall by as much as 4 percentage points if the euro area experiences the IMF's downside scenario, which would see global growth falling by 1.75 percentage points.

But even in this worst-case scenario, China has room for a countervailing fiscal response, he said.

Given the uncertain global outlook, some modest fiscal support to the economy is warranted, he said. In particular, a general government deficit of about 2 percent of GDP should be targeted. (China Daily)

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