IMF Revises China's Economic Growth Projections Amid Strong First Quarter Performance
The International Monetary Fund (IMF) has adjusted its growth forecasts for China's economy following a robust performance in the first quarter of 2024. The IMF now anticipates the Chinese economy to expand by 5% this year, a notable increase from its earlier prediction of 4.6%. This adjustment reflects China's better-than-expected GDP growth of 5.3% year-on-year in the first three months of the year.
IMF's first deputy managing director, Gita Gopinath, highlighted that this upward revision is largely due to the stronger-than-expected GDP data from the first quarter and some recently announced policy measures aimed at bolstering economic stability. Despite this positive outlook, the IMF warns that China’s economic growth could slow down to 3.3% by 2029, citing factors such as an aging population and slower productivity growth as significant issues.
Inflation and Economic Indicators
Inflation is also a critical concern, though it is anticipated to remain low. Gopinath noted in a press conference that core inflation is expected to rise gradually, reaching an average of about 1% in 2024. Recent economic indicators for April, including factory production, trade, and consumer prices, suggest that China's $18.6 trillion economy has managed to navigate some immediate risks. However, the sustainability of this recovery remains uncertain, as April saw retail sales grow at the slowest pace since December 2022, and new home prices fell at their quickest rate in nine years.
Real Estate Sector Challenges
China's economic growth has been significantly constrained in recent years by a lingering debt crisis within its real estate sector, which constitutes about a quarter of its GDP. The IMF's final note on the Article IV consultation emphasizes the need for a comprehensive policy package to facilitate adjustments in the real estate sector and stimulate domestic demand to counteract these downside risks.
- Gopinath emphasized that while there are positive signs, caution is warranted due to external and internal economic challenges. The IMF suggests prioritizing measures that can drive sustainable long-term growth.
- The report from the IMF downplayed immediate inflationary fears but highlighted that the output is still below potential, indicating room for growth that is yet to be fully realized within the Chinese market.
