Let us consider the four GDP components – consumption (C), investment (I), government expenditure (G) and net exports (NX). The outlook for NX is clouded by the Sino-US trade conflict.
NX: TRADE WAR UNCERTAINTY
Do not expect any contribution to growth.
G: FISCAL SUPPORT VIA TAX CUTS
The stimulus from tax cuts could amount to 0.9% – 1.6% of GDP, with VAT cuts in focus.
I: INFRASTRUCTURE AND PRIVATE INVESTMENT RECOVERY
Relaxation of the local governments’ funding constraint will boost infrastructure investment, while a policy-driven credit support may help private sector “animal spirits” to recover.
C: CONSUMPTION TO BENEFIT
Consumption upgrade to continue.
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