IMF upgrades China’s 2023 growth forecast to 5.4% amid resilient recovery

The International Monetary Fund (IMF) has revised its 2023 growth forecast for China from 5% to 5.4%, attributing the adjustment to the country’s robust recovery following the COVID-19 pandemic and recent policy changes. The revised figures also take into account stronger-than-expected Q3 results, which saw China’s GDP grow by 4.9%, surpassing expectations.

Gita Gopinath, the First Deputy Managing Director of IMF, during her visit to China, met with various high-level officials including People’s Bank of China Governor Pan Gongsheng, CSRC Chairman Yi Huiman, National Bureau of Statistics Commissioner Kang Yi, and Vice Minister of Finance Liao Min. She underscored the necessity for more supportive measures for China’s property market, like expediting the exit of nonviable property developers and securing additional central government funding for housing completion.

Despite this upward revision for 2023, the IMF predicts a slowdown in 2024 with GDP growth potentially dropping to 4.6%. This is an improvement over their October estimate of 4.2% and is attributed to enduring difficulties in China’s property sector and lackluster external demand.

The IMF also anticipates a consistent reduction in growth to around 3.5% by 2028, impacted by obstacles such as low productivity and a swiftly aging population. These projections come after China’s decision to approve a 1 trillion yuan sovereign bond issue and allow local governments to fast-track their 2024 bond quotas in an effort to stimulate the economy.

Despite challenges in the real estate sector and local governments leading to a rare budget deficit increase, China’s Q3 GDP growth supports predictions of full-year growth of 5% or more. The Central Financial Work Conference highlighted medium-term priorities, focusing on property sector risks, local government debt, and small and medium banks.

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