(Bloomberg) -- China's top leaders said the nation is facing “unprecedented” economic difficulty, signaled that more stimulus is in the works, and softened their tone on the importance of reaching specific growth targets this year.
The government will adopt macro policies of greater strength to cushion the impact of the coronavirus pandemic, according to a statement released Friday after the Politburo meeting.
The meeting, led by President Xi Jinping, pledged to reduce interest rates and the amount of cash banks have to keep at the central bank and repeated that the government will sell more bonds and raise the fiscal deficit.
China Suffers Historic Economic Slump With Hard Recovery Ahead
The meeting was held the same day as China announced that the economy contracted 6.8% in the first quarter after shutdowns to contain the spread of the coronavirus. The outlook for China this quarter is also weak, as other nations are now also limiting economic activity to try and stop the outbreak, likely hitting demand for China's exports.
The statement said that the nation should “stick closely” to the goal of achieving a moderately prosperous society this year, a weaker statement compared to the previous phrase which said that the government should “ensure the achievement.”
The meeting shows the leadership may have “relented somewhat” on its pledge to double gross domestic product and income from the 2010 level this year, economists at Citigroup Inc. including Li-Gang Liu wrote in a note after the meeting. That would require growth this year of 5.6%, they wrote, well above the 3.0% expansion expected according to a Bloomberg survey of economists.
“The Politburo meeting reiterated the need for a more proactive fiscal policy and still prudent monetary policy, but with more flexibility,” the Citigroup economists wrote, adding a larger-than-expected comprehensive fiscal stimulus effort could be underway.
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