SHANGHAI (Reuters) – China needs more active fiscal policy as pressure on its economy is still increasing, according to an article by Finance Minister Liu Kun published in the official People’s Daily on Thursday.
The comments come amid growing market expectations that the government may announce a substantial new stimulus package soon to help businesses and households hit hard by the coronavirus outbreak. The annual National People’s Congress (NPC) session starts on May 22.
“At present, China’s economic and social development is still facing great uncertainties, and downward pressure on the economy is still increasing,” Liu said.
“A more active fiscal policy is a practical need to hedge the downward pressure of the economy.”
China has rolled out a series of fiscal and monetary support measures since the outbreak intensified in January to mitigate the economic damage from the health crisis. Analysts widely expect the NPC to approve more corporate relief measures, a higher fiscal deficit target and allow local governments to sell more debt to fund infrastructure projects.
Liu said further tax cuts would help companies, saying that ensuring and expanding jobs was a top priority.
China also will guarantee the supply of food and important agricultural products, including implementing policies to support the recovery of pig production, he added.
The coronavirus outbreak has had a huge impact on China’s fiscal revenue growth, he noted.
“In the first quarter of this year, fiscal revenue showed negative growth, it is expected that fiscal revenues for the full year of 2020 will be lower than the previous year.”
China said on Sunday it will step up support for the economy and make monetary policy more flexible to fend off financial risks.
The economy contracted 6.8% in the first quarter from a year earlier, shrinking for the first time since at least 1992, as the virus outbreak and tough containment measures paralysed production and spending, raising pressure on authorities to do more to stop mounting job losses.
Economists polled by Reuters expect growth to recover to 1.3% in the current quarter as activity slowly fires back up, though some warn the risk of a recession is high with the global economy facing its worst slump since the 1930s Great Depression.
(Reporting by Emily Chow and Wang Jing; Editing by Kim Coghill)