China registers the lowest inflation in 14 years, why is it bad news for Uruguay?

China registers the lowest inflation in 14 years, why is it bad news for Uruguay?

The inflation in China fell again during the month of January to stand at 0.8%, according to data from the Public Statistics Officebecoming the worst record in 14 years.

Since the second half of 2009, in the midst of a global financial crisis, prices in China they did not decrease so significantly. A year ago, the Asian giant had reported a price index of 2.1%.

The drop in prices is much more pronounced than expected by analysts consulted by the economic information agency Bloomberg, who predicted a decline of 0.5%.

Last month was the fourth consecutive month of deflation in the world’s second largest economy, where the slow postcovid recovery has delayed the reactivation of consumption.

The latest inflation data will increase pressure on Chinese government authorities to introduce more economic stimulus. The interest rate cut and measures to boost credit have had little effect so far.

China needs to take action quickly and aggressively to avoid the risk of deflationary expectations setting in among consumers,” said Zhiwei Zhang, president and chief economist of the firm. Pinpoint Asset Managementreported AFP.

Why does low inflation in China have a negative impact?

The deflation poses long-term risks to the economy because it leads consumers to delay purchases in anticipation of a further fall in price.

This weakens demand and forces companies to cut production, freeze hiring or even lay off workers.

Net raw material exporting countries, such as Uruguaytheir placements in China if the demand for their companies decreases.

In the last year, with a delayed economic reactivation in power, exports to China They were 2,533 million dollars (22% of the total). In 2022 (record year for Uruguayan placements abroad) they were 3,675 million dollars (28% of the total).

The trend in China contrasts with that of other large economies, where the high inflation It represents a problem for households and companies and forces central banks to raise interest rates.

Source: Ambito

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts