UBS AG reduced its estimate for China’s growth this year and next year as weaker expansion in developed economies crimps exports.
The investment bank cut its forecast for GDP growth this year to 9 percent from 9.3 percent and its estimate for next year to 8.3 percent from 9 percent, Wang Tao (王濤), chief China economist at UBS in Hong Kong, said in an e-mailed research note yesterday.
Switzerland’s biggest bank joins Morgan Stanley and Deutsche Bank AG in lowering estimates for the world’s second-biggest economy as faltering expansion in the US and Europe and a deepening debt crisis in the eurozone threaten to sap demand for mobile phones, clothes and computers made in China.
“This downward revision reflects much weaker growth prospects in developed economies,” Wang wrote in the report. “A significant drop in export growth, which could start in the fourth quarter of 2011, is also expected to affect manufacturing, investment and consumption.”
Morgan Stanley cut its economic growth forecast for China for next year to 8.7 percent from 9 percent on Aug. 18. Deutsche Bank lowered its prediction for this year to 8.9 percent from 9.1 percent and for next year to 8.3 percent from 8.6 percent in a report the previous day.
UBS lowered its estimate for an expansion in China’s overseas sales by 3 percentage points in volume terms to about 6 percent next year and expects net exports to subtract about 1 percentage point from GDP growth next year.
The bank on Wednesday cut its forecast for expansion in the EU next year to 1 percent from 2 percent, citing tighter financial conditions and more restrictive fiscal policy than previously envisaged, and reduced its estimates for expansion in the US last month.
Wang did not expect China to change its macroeconomic policy stance for the time being as the domestic economy, most notably property construction and manufacturing investment, remains “strong.”
Monetary policy easing could start as early as end of this year if indicators such as exports, production and investment have faltered by then, Wang said.
Weaker global demand and commodities prices will help ease China’s inflation, the bank said, reducing its forecast for the consumer-price gains next year to 3.5 percent from 4 percent.