IMF Lifts China Growth Forecast to 5% Citing Fast Start to 2024

IMF Lifts China Growth Forecast to 5% Citing Fast Start to 2024

The International Monetary Fund (IMF) has revised its growth forecast for China’s economy, anticipating a 5% expansion in 2024. This is an increase from the 4.6% forecast earlier this year, reflecting a robust economic start and additional governmental support. 

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The IMF’s adjustment is based on data showing a strong performance in the first quarter and ongoing public investment.

First Quarter Surge Bolsters Confidence

China’s economy grew by 5.3% in the first quarter of 2024, surpassing expectations and setting a positive tone for the year. This early surge has prompted the IMF to revise its forecast upwards. The growth was driven by a mix of factors, including recovering consumption and strong public investment. 

However, challenges remain, particularly in the housing sector, which continues to dampen domestic demand.

Public Investment Outpaces Private Sector

IMF First Deputy Managing Director Gita Gopinath highlighted that while consumption is on the mend, it still has a long way to go to reach pre-pandemic levels. Public investment remains a critical driver of growth, whereas private investment lags due to the persistent weakness in the property market. The IMF's report underscores the need for balanced growth across sectors to sustain momentum.

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Addressing the Housing Market Slump

The housing market remains a significant concern for China’s economic stability. Despite various efforts to stabilize prices and boost demand, the sector has not fully recovered. The IMF has urged Beijing to enhance its fiscal and monetary policies to address this issue. 

Specifically, Gopinath emphasized the importance of mobilizing central government resources to protect buyers of pre-sold unfinished homes and to expedite the completion of these projects. This approach aims to resolve the problems of insolvent developers and restore confidence in the real estate market.

Recent Government Measures

In response to the ongoing housing crisis, Chinese officials recently announced new measures to support the real estate market. It includes making it easier for people to buy homes by lowering down-payment requirements and giving local governments 300 billion yuan (about $42 billion) from the central bank to buy extra housing from developers. 

While these steps are seen as positive, the IMF believes more comprehensive support is necessary.

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Future Outlook

Looking ahead, the IMF has also raised its growth forecast for China in 2025, from 4.1% to 4.5%. This optimistic outlook hinges on the continued implementation of supportive policies and the resolution of key economic challenges. China’s target of around 5% growth for 2024 appears attainable, provided that consumption recovery gains momentum and the housing sector stabilizes.

The IMF’s updated forecast reflects a cautious optimism about China’s economic trajectory, underscoring the importance of strategic interventions to navigate current challenges and sustain long-term growth.

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