February 12, 2020 / 5:15 AM / 9 days ago

China's GDP goal on track despite virus impact - government economist

BEIJING (Reuters) - China will be able to achieve its long-term goal of doubling gross domestic product and incomes this year despite the impact from a conoravirus outbreak, an influential economist at a top government think tank said on Wednesday.

FILE PHOTO: A cleaner wearing a face mask walks at the Zhongguancun Software Park, on the morning after the extended Lunar New Year holiday caused by the novel coronavirus outbreak, in Beijing, China February 10, 2020. REUTERS/Tingshu Wang

The virus outbreak will only have a one-off hit on the economy and demand will recover quickly, Cai Fang, the vice head of the Chinese Academy of Social Sciences (CASS), said in an article in the People’s Daily, the newspaper of the Chinese Communist Party.

“Although the temporary impact caused by the epidemic will slightly reduce the growth rate and other development indicators, it will not delay the fulfillment of the goal of building a moderately prosperous society,” Cai said.

This year is crucial for the ruling Communist Party to fulfill its goal of doubling gross domestic product (GDP) and incomes in the decade to 2020.

A growth rate of about 5.7% this year will be enough for achieving the goal of doubling GDP and incomes, Cai said.

Analysts believe growth could decelerate sharply by 2 percentage points or more from a 6% expansion in the last quarter, but they say business and consumer activity could rebound sharply if the outbreak peaks soon, much like the pattern during the SARS epidemic in 2003.

The government should use policy tools in a timely and flexible way and adopt “unconventional policy tools”, to support the economy, Cai said without elaborating.

The government has taken some stimulus measures, including injecting liquidity into the banking system, providing re-lending and fiscal support for some firms, and more steps are expected.

The epidemic has delayed the return of migrant workers to cities and affected the resumption of firms’ operations, which could lead to unemployment and lower incomes, Cai said.

Regions that have not been hit hard by the epidemic should allow migrant workers to return to cities and let firms resume operations on the condition the outbreak is controlled, he said.

Reporting by Kevin Yao; Editing by Christian Schmollinger

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