China's fiscal deficit may expand tenfold: World Bank
China's fiscal deficit may expand tenfold this year, a result of government spending on stimulus plans, said Louis Kuijs, the World Bank's senior economist, on Wednesday.
China's fiscal deficit was equivalent to 0.5% of the country's gross domestic product (GDP) in 2008. China is expected to see a deficit of 3% or more this year.
During the first four months of this year, government revenue declined 10%, while expenditures surged 32% due to the RMB 4 trillion stimulus package, Kuijs said, adding that the more fiscal firepower the government uses in 2009, the less will be left over for 2010.
Kuijs said that China's GDP growth has been between 6% and 7% so far this year due to the effects of economic stimulus packages and changes to monetary policies.
Policy makers should focus on making the mid-term and long-term strategic reforms that are necessary to bring balanced economic growth, Kuijs said, adding that major deflation is unlikely in the short term.
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