THE INTERNATIONAL MONETARY FUND has teased its forecast for China’s growth this year to 5.2%, 0.8 of a percentage point higher than its forecast last October.
The latest update to its World Economic Outlook attributes the upward GDP revision to Beijing ending its zero-Covid policy last November.
For 2024, the Fund expects China’s economic recovery to moderate to 4.5%, unchanged from its October forecast. After that, it expects growth to settle below 4% over the medium term amid declining business dynamism and slow progress on structural reforms.
Overall, the Fund expects global growth to fall from an estimated 3.4% in 2022 to 2.9% in 2023 but then rise to 3.1% in 2024, with central banks’ suppression of inflation and Russia’s war in Ukraine continuing to weigh on economic activity.
What the Fund calls’ severe health outcomes in China’ is one of the downside risks to the global economy it identifies, along with persistent inflation (a risk exacerbated if China’s economy grows faster than expected), an escalation of the war in Ukraine and worsening debt distress.
Amid still-low population immunity levels and insufficient hospital capacity, especially outside the major urban areas, significant health consequences could hamper the recovery.
The IMF says accelerating Covid-19 vaccinations in China would ‘safeguard’ the global recovery.
It again highlights the continuing weakness in property investment in China, warning that a deepening crisis in the real estate market remains ‘a major source of vulnerability’, with risks of widespread defaults by developers and resulting financial sector instability.
Developer restructuring is proceeding slowly, amid the lingering property market crisis. Developers have yet to deliver on a large backlog of presold housing, and downward pressure is building on house prices (so far limited by home price floors).
Reopening the economy should boost consumer and business sentiment and release pent-up demand, which had remained subdued coming out of 2022. At 3.0%, last year was the first time in more than 40 years that China’s economy grew below the global average.