BINGO: Growth projection down to 7.5%

Written by Julen Madariaga on November 26th, 2008

I am quite excited about the new 2009 Growth Forecast for China issued by the World Bank, because it gives exactly the same figure  I estimated 2 months ago on my Crisis Page.

OK, granted there is a bit of luck in there. But, if you think of it, it was an obvious number to come up with. It is exactly the Yearly Growth marked as an objective in the 11th 5 year plan. Don’t forget that China is still a planned economy and that the objectives of the 5 Year Plans are very present in everyday business life and in the minds of all politicians.

Of course, I am not suggesting that World Bank economists draw their forecasts from 5 year plans. But in times like these, predicting the future is a sticky business, and one 5Y Plan can be about as accurate as applied statistics. And then, rounding up a 7.2% to a 7.5% will harm nobody, and will keep Wen and Hu happy for a while.

Michael Pettis writes that this is only the beginning, and that we’ll see the forecasts slide every time as the crisis spreads to every aspect of China’s economy over 2009. He bases his prediction on the method that is used to calculate these forecasts, which does not take into account the passive side of the balance sheet.

He is surely right on that, but I think there are also non-economical reasons. China’s political influence is rising very fast with the Crisis, and nobody wants to upset her now that she is going to save the World. Least of all the World Bank, which is very likely to end up with a Chinese boss pretty soon, after what was agreed in the Washington G20s meeting.

Nobody cares (some actually take pleasure) when some terrible macro figures are posted about failing economies in times of crisis. But few serious institutions today will be willing to publish a face-losing digit for the Chinese government, and all will measure their steps cautiously. As a result, official predictions will lag behind the actual knowledge.

So that’s it, we are here. We’ve reached the 7.5%  psychological barrier. There will be no more psychological barriers until the 3.8% growth of 1990. We are touching the Wall.

Ladies and Gentlemen fasten your safety belts, we are getting ready to land.

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Comments so far ↓

  1. Nov
    Stacey Derbinshire

    I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you down the road!

    [Reply to this comment]

  2. Nov

    Thanks, your site is cool too, looks professional.
    And I think you are sexy!

    [Reply to this comment]

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