S&P sees ECB doubling QE, tests savage China slowdown

By Marc Jones

LONDON (Reuters) - Standard and Poor's on Wednesday predicted the European Central Bank could double the size of its bond buying stimulus program in the coming months and tested a major slowdown in China's economy.

"We wouldn't be surprised if the bank (ECB) announced as early as December this year that it intends to extend its QE program well beyond 2016, until mid-2018, for a total that could reach 2.4 trillion euro," S&P's European chief economist, Jean-Michel Six, wrote in a report.

Worldwide low inflation and economic growth would trigger the ECB move, Six said, as he also assessed the possibility of a much more severe than expected slowdown in China's economy.

"We assumed that China's real GDP growth slows to 4.4 percent in 2016 (6.3 percent in our baseline forecast) and 3.9 percent in 2017 (6.1 percent)."

"In that simulation, euro zone GDP is 0.8 percent lower by the end of 2017. Germany is most affected, as its GDP

ends up 0.9 percent lower in late 2017," he added.

(Reporting by Marc Jones; Editing by Janet Lawrence)

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