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IMF revises China's 2024 growth forecast to 5%, predicts slowdown to 3.3% by 2029
IMF's First Deputy Managing Director Gita Gopinath with People’s Bank of China Governor Pan Gongsheng in Beijing. (Image Courtesy: x.com/GitaGopinath)

IMF revises China's 2024 growth forecast to 5%, predicts slowdown to 3.3% by 2029

| @indiablooms | 29 May 2024, 11:33 pm

Beijing: The IMF on Wednesday revised its projection for China's economic growth to 5 percent in 2024, up from its previous estimate of 4.6 percent, media reports said.

However, it warned of a likely slowdown, predicting a contraction to 3.3 percent by 2029 due to an aging population and sluggish productivity growth.

The IMF suggested boosting productivity through ongoing economic reforms to counteract these challenges.

The 5 percent growth adjustment by the IMF is in line with the target set by the Chinese government for the world's second-largest economy.

China is currently experiencing a slowdown, driven by challenges such as the property sector crisis and industrial overcapacity.

"China's economic growth is projected to remain resilient at 5 per cent in 2024 and slow to 4.5 per cent in 2025," IMF's First Deputy Managing Director Gita Gopinath told the media here after the IMF's annual review of China's economic policies.

Amidst the downturn in its property market and subdued domestic demand, the Chinese economy expanded by 5.3 percent in the first quarter.

"The revisions of 0.4 percentage points for both years compared to the April projections are driven by strong Q1 GDP data and recent policy measures," Gopinath noted.

Gita Gopinath joined the policy discussions and met with People’s Bank of China (PBoC) Governor PAN Gongsheng, Ministry of Finance (MOF) Vice Minister LIAO Min, Ministry of Commerce (MOFCOM) Vice Minister WANG Shouwen, and Chinese banks to discuss the state of China's economy.

"Over the medium term, growth is expected to decelerate to 3.3 per cent by 2029 due to ageing and slower productivity growth," she said.

China's property sector, which has been a key driver of the country's economy in recent years, continued to be a major worry, leading to a widespread crisis.

Earlier this month, after prolonged indecision, China took decisive action to address the near collapse of its massive property sector.

To address the problem, China allocated billions of dollars to repurchase unsold homes and unused land, with the aim of revitalizing the struggling real estate sector, which has historically been a cornerstone of China's economic growth.

The People's Bank of China has established a 300-billion-Yuan re-lending facility, equivalent to nearly USD 42.25 billion, aimed specifically at government-subsidized housing projects.

Gopinath said, "The ongoing housing market correction, which is necessary for steering the sector towards a more sustainable path, should continue."

Achieving high-quality growth will require wide ranging structural reforms, IMF noted, adding that key priorities include rebalancing the economy towards consumption by strengthening the social safety net, liberalizing the services sector, and scaling back distortive supply side policies that support the manufacturing sectors.

The IMF's assessment of the Chinese economy precedes the upcoming meeting of the ruling Communist Party of China's plenum, which will focus on strategies to enhance the country's economic prospects.

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