China's local government finances to suffer 'interim' impact due to virus

BEIJING (Reuters) - China's local governments will suffer an "interim impact" on fiscal revenue and expenditure from the virus epidemic that the country has so far allocated 99.5 billion yuan (10.9 billion pounds) to fight, a finance ministry official said on Monday.

The central government will increase the amount and speed of transfer payments to local governments to help alleviate the pressure, Assistant Finance Minister Ou Wenhan told a news conference in Beijing.

Policymakers have rolled out a raft of measures to support an economy jolted by the virus, which is expected to have a devastating impact on first-quarter growth. The coronavirus has infected nearly 77,000 people and killed more than 2,500 in China, most in Hubei.

Chinese regional and local governments could see contractions in their 2020 revenue growth, with added pressure from healthcare spending and subsidies for virus-struck firms, analysts from Moody's said in a note last week.

But the regional governments "currently most affected by the outbreak have stronger financial profiles," they said.

Local financial departments are stabilising fiscal operations by "vigorously reducing general expenditures and doing everything possible to raise funds," Ou said.

Expenditure on virus prevention and control work should be prioritised, he said.

China is expected to keep fiscal stimulus on track in the near term to stabilise growth. On Saturday, Beijing municipality announced investment projects involving 252.3 billion yuan this year, focusing on infrastructure and housing.

"The outbreak of novel coronavirus pneumonia will inevitably have a relatively big impact on the economy and society," President Xi Jinping was quoted as saying by state media on Sunday, adding that the impact would be short-term and controllable.

(Reporting by Gabriel Crossley; Writing by Se Young Lee; Editing by Jacqueline Wong)