The outlook for the global economy is for a gradual recoveryin 2012. Risks to the outlook,however, are strongly tilted to the downside as the European crisis continues.
Meanwhile, despite weaker external demand, China’s economy continues to avert a hard landing. Domestic demand has held up with support from an easing policy stance. We aremaintaining our growth projections of 8.3% and 8.7% in 2012-13.
With inflation continuing to moderate, we anticipate a further easing of monetary policy to support growth, including further reductions in the RRR, along with interest rate cuts if the external environment fails to recover. The 2012 budget stance is mildly growth supportive, with increased spending on affordable housing and social programs.
Currency appreciation has slowed considerably given the weak external environment. Based on our scenario of a somewhat improved external environment, we expect some appreciation during the rest of the year.