IMF increases China’s GDP growth prediction after strong Q1 performance

Lorenzo Bagnato

29 May 2024 - 14:10

twitter whatsapp

China’s GDP could meet its target growth this year, the International Monetary Fund now believes.

IMF increases China's GDP growth prediction after strong Q1 performance

The International Monetary Fund (IMF) extended its prediction for GDP growth in China this year. Before Beijing posted its first quarter GDP data, the IMF predicted a total growth of 4.6% for 2024.

The prediction came shy of Beijing’s own goal of “around” 5% growth this year, considered overly optimistic by Western experts.

However, the IMF revised its prediction to match Beijing’s goal, saying the Chinese economy will expand by 5% in 2024. However, the same report lowered the growth forecast for the upcoming years. In 2025, the Chinese economy is expected to expand by 4.5%. By 2029, the report said, growth will lower to 3.3%, down from the previous forecast of 3.5%.

The IMF said it changed predictions after a stronger-than-expected Q1 growth of 5.3%. The January-March period is generally the best-performing for China’s economy because of the Chinese New Year, which falls every year between January and February.

Moreover, the Chinese economy received an additional boost in early 2024 because of its large import and export activity. Exports increased by 7.5% in the January-February period, albeit an unexpected slump in March.

Exports are set to increase even more in this quarter, as output production rose significantly in April.

Digging out of the hole

The IMF’s prediction came as China battles its worst real estate crisis in history, which analysts believe could significantly hamper future growth if not properly dealt with.

Several Chinese property giants, including Evergrande, Country Garden, and Shimao, went or are going to go bankrupt very soon. The real estate market amounts to roughly 25% of China’s GDP.

Last week, Beijing approved a historic aid package to buy unused homes and turn them into social housing. The 300 billion yuan (41 billion USD) package, however, is just a drop in the water compared to the 30 trillion yuan unsold properties in the country.

The priority should be to mobilize central government resources to protect buyers of pre-sold unfinished homes and accelerate the completion of unfinished presold housing, paving the way for resolving insolvent developers,” IMF’s first deputy managing director Gita Gopinath said.

Achieving high-quality growth will require structural reforms to counter headwinds and address underlying imbalances,” she added.

Meanwhile, China’s deflationary pressure drags the yuan’s value down, further hampering rescue attempts by the central government. The IMF predicts 2024 inflation to reach 1%, significantly lower than the 2% recommended by central banks.


# China

Trading online

Fai Trading Online senza rischi con un conto demo gratuito: puoi operare su Forex, Borsa, Indici, Materie prime e Criptovalute.