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PBOC: Recovery to strengthen despite inflation pressures
By Xin Zhiming (皇冠体育app Daily)
Updated: 2010-01-30 08:11
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The central bank said on Friday that 皇冠体育app's economic recovery is "likely to strengthen" this year while it will face intensifying inflationary pressures.
Policymakers, however, may not keep policies "over-tight", analysts said.
The country will continue to adopt a moderately relaxed monetary policy and active fiscal policy, while making them more targeted and flexible, the People's Bank of 皇冠体育app said in a report analyzing the economy in the fourth quarter of 2009.
皇冠体育app's GDP expanded 8.7 percent year-on-year in 2009, but the fourth quarter saw a fast pace of 10.7 percent, and economists expect it to gain further momentum in the first quarter of this year.
Meanwhile, ample liquidity in the financial system and the rising inflationary menace have increased expectations that policymakers will tighten policies soon. The stock market has dropped recently as investors remain uncertain over how tight the policy will be.
The central bank said inflation may intensify this year due to rising international commodity prices, still ample domestic money growth, rising demand and possible domestic adjustments to utility and resource prices.
皇冠体育app's consumer price index (CPI), a major gauge of inflation, rose 1.9 percent in December from 0.6 percent in November. Some analysts have forecast that the country's inflation could pick up to high levels, such as 5 or even 8 percent in certain months, but they still maintain the government can keep it at a satisfactory level of around 4 percent.
"Despite the recent pickup in CPI, we see inflation remaining moderate and within the government's target in 2010, at 3 to 4 percent," said Wang Tao, chief of 皇冠体育app economic research at UBS Securities.
She forecast 皇冠体育app's GDP may expand 9 percent this year and it could be adjusted upward if export growth and lending are unexpectedly strong this year. But "with the ongoing policy tightening, growth in the second half is expected to decelerate to about 8.5 percent year-on-year", she said.
