IMF upgrades China’s 2023, 2024 GDP growth forecasts

IMF upgrades China’s 2023, 2024 GDP growth forecasts

The International Monetary Fund (IMF) has upgraded its 2023 gross domestic product (GDP) growth forecast for China to 5.4% from 5%. This is due to a strong post-COVID-19 recovery. However, the IMF still expects China’s economy to slow down next year. The IMF predicts that GDP growth could slow to 4.6% in 2024, mainly because of weakness in China’s property sector and subdued external demand. This forecast is better than the IMF’s previous expectation of 4.2% in their World Economic Outlook (WEO) report.

The upward revision in China’s GDP growth forecast is a result of the country’s decision to approve a 1 trillion yuan ($137 billion) sovereign bond issue and allow local governments to frontload part of their 2024 bond quotas. These measures are aimed at supporting the economy. IMF’s First Deputy Managing Director Gita Gopinath stated that the projections reflect the stronger-than-expected third-quarter performance and recent policy announcements.

Looking ahead, the IMF projects that China’s growth will gradually slow to about 3.5% by 2028. This is due to challenges such as weak productivity and population aging. Gopinath emphasized that while China has implemented measures to support the property market, more actions are needed to ensure a faster recovery and lower economic costs during the transition. She suggested a comprehensive policy package that includes accelerating the exit of nonviable property developers, removing obstacles to housing price adjustment, allocating additional central government funding for housing completion, and assisting viable developers in adapting to a smaller property market.

Economists warn that the combination of the property sector downturn and local government debt crunch could significantly impact China’s long-term growth potential. Local debt has reached 92 trillion yuan ($12.6 trillion), accounting for 76% of China’s economic output in 2022, up from 62.2% in 2019. Gopinath called for coordinated fiscal framework reforms and balance-sheet restructuring to address local government debt strains. She also emphasized the need for a comprehensive restructuring strategy to reduce the debt level of local government financing vehicles (LGFVs), which pose a major risk to China’s slowing economy.

In conclusion, the IMF has upgraded China’s GDP growth forecast for 2023 but expects a slowdown in the following year. The country’s strong recovery and recent policy announcements have contributed to the upward revision. However, challenges in the property sector and local government debt pose risks to China’s long-term growth potential. Coordinated fiscal reforms and debt reduction strategies are necessary to address these challenges.

About News Team

Hi, I'm Alex Perez, an experienced writer with a focus on lifestyle and culture news. From food and fashion to travel and entertainment, I love exploring the latest trends and sharing my insights with readers. I also have a strong interest in world news and business, and enjoy covering breaking stories and events.

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