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3.2 Forecasts of China's Major Macroeconomic Indicators for 2015–2016

3.2.1 Forecast of GDP Growth

Assuming the above exogenous variables, the predictions based on CQMMs show that in 2015, China's GDP growth rate will continue to fall to 7.14, 0.26 % lower than that in 2014. By 2016, the GDP growth rate will rise slightly to 7.20 %. Subsequently it will fall but then reverse in a late recovery over the next two years. The main reason for this is that manufacturing still faces inventory pressure, the commercial housing construction area is also historically high, and the growth rate of investment will continue to fall. Under the influence of slow resident real income growth rate and the economic downturn, the final consumption support to the economy wanes. However, external market recovery will ease the pressure on the economic downturn to a certain extent. In 2016, the dividend of the comprehensively deepened reform of the system will gradually appear, and improvement in the external economic environment will improve China's economic growth to a certain extent. From the quarterly year-on-year growth rate shown in Fig. 3.4, we find that following the negative growth of the export in the first quarter of 2014 and a low base, the year-on-year growth rate of exports will rebound significantly. China's economic growth rate is expected to fall to 7.23 % in the first quarter of 2015. Then, from the base effect of the same period last year, the growth rate will further slow down to 7.01 % in the second quarter; following the export and investment recovery, the economy will then rebound to 7.10 % in the third quarter and continue to uplink to 7.22 % in the fourth quarter.

Fig. 3.5 Forecasts of major price indices (year-on-year basis) (Note: CPI, P_GDP, and PPI denote consumer price index, GDP deflator, and producer price index, respectively)

3.2.2 Forecasts of Major Price Indices

The CQMM predicts that the CPI will rise by 1.74 % in 2015, a decrease of 0.26 % from 2014. By 2016, the CPI is expected to rise slightly to 2.12 %. By quarters (Fig. 3.5), because of weak demand, the CPI could fall to 1.37 % in the first quarter of 2015, and, following the rebound of consumption, could rise moderately to

1.67 % in the second quarter, further rise to 1.82 % in the third quarter, and continue to rise to 2.11 % in the fourth quarter.

The PPI in the next two years will continue to maintain a negative trend, but the decline is expected to gradually narrow. The PPI is expected to fall to −2.15 % in 2015 and could further narrow to 1.52 % in 2016. By quarters (Fig. 3.5), the PPI may fall to −2.38 % in the first quarter of 2015 and then recover to 2.11 % in the second quarter; the decline tends to narrow until the fourth quarter, when it will recover to −1.83 %. In 2016, as the pressure of backward production capacity drops and the enterprise management situation improves, the index will continue to rise, reaching −1.22 % in the fourth quarter.

In 2015, the GDP deflator (P_GDP) could rise to 0.70 % and further improve to

1.52 % in 2016. By quarters, it could rise to 0.15 % in the first quarter of 2015, continue to rise to 0.98 % in the second quarter, and, after an apparent fall, rebound until the fourth quarter to 1.18 %. In 2016, the index could show a tendency of low after high and then fall to 0.92 % by the fourth quarter (Fig. 3.5).

Overall, the Chinese economy is facing a downward pressure in 2015, but the economic growth rate is expected to be over 7.0 % and the full-year GDP growth rate is expected to be around 7.14 %. Inflation in China continues to drop beyond the current low level, and the CPI is expected to rise by 1.74 % through the year. We predict that under the gradually appearing effects of China's comprehensively deepened reform policy and the world economic recovery, the country's GDP growth rate will recover in 2016; the CPI growth rate will also increase.

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