Search ForexCrunch

Monetary policy has been less effective in buttressing growth by itself, especially in the European Union and China. As a result, these nations need a more expansionary fiscal policy, said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis SA.

Key quotes

China’s issuance to grow as the budget gap widens from 7.9% this year to 9% of GDP.

One drawback of fiscal expansion is its upward pressure on interest rates.

China announced CNY 2 trillion worth of tax cuts this year spurred provinces to boost infrastructure spending. Even so, the economy grew an underwhelming 6% in the third quarter to register its weakest rate in at least 27 years.  

With the swelling deficit, the nation has little room to provide a “flood-like” stimulus.