The IMF raised its GDP forecast for China to 5.4%

Experts from the International Monetary Fund (IMF) have improved their expectations for Chinese economic growth this year from October’s 5% to 5.4%, according to the organization’s report following its mission to China. This corresponds to the official target of the Chinese government for 2022 of 5.5%; in fact, GDP growth last year was 3%. Also, the estimate of economic growth in 2024 was increased by 0.4 percentage points to 4.6%. IMF experts say the main reason for the improvement in forecasts is the continued momentum from the opening of the Chinese economy after the lifting of anti-Covid restrictions. However, they point out that against the background of problems in the real estate sector, sluggish domestic and external demand, an aging population, as well as high debts of regional governments, the Chinese authorities will have to introduce additional measures to support the economy and financial system in order to support economic growth and investment growth. The IMF believes that by 2028, China’s growth will slow to 3.5% per year.

“Macroeconomic support measures are needed to stimulate activity against the background of the necessary settlement of the situation in the real estate market and structural reforms aimed at solving the problem of state debts. Refocusing fiscal spending on households and lowering interest rates will support growth and investment. Greater flexibility of exchange rates will help mitigate external shocks and speed up the process of monetary transmission (changes in economic conditions depending on the actions of the regulator – Vedomosti),” said IMF First Deputy Managing Director Gita Gopiat. She notes that China’s financial risks remain elevated, particularly due to low capital reserves held by financial institutions and risks of asset quality deterioration.