Uncertainty surrounding the Chinese economy is high, says the International Monetary Fund (IMF). It expects the world’s second biggest economy to grow by 4.6% this year and slow down to 4% in 2025.
The ongoing housing sector crisis, it said, could further dampen private demand and confidence and lead to budget strains.
“Deeper-than-expected contraction in the property sector could further weigh on private demand and worsen confidence, amplify local government fiscal strains, and result in disinflationary pressures and adverse macro-financial feedback loops,” an IMF report has warned. “Staff estimate that, in such an adverse scenario which entails a deeper and more prolonged contraction in the property sector, GDP in 2025 could be 1.8% lower compared to the baseline (of 4%).”
Last year, the Chinese economy grew by 5.2%, which was higher than expected.
Post-Covid, China’s recovery has been patchy and the IMF believes that weaker exports and lending could exert greater strain.
The growth is also likely to be curtailed due to ongoing geopolitical tensions, the IMF noted.
The outlook was part of IMF’s review of its Article IV consultation, which took place in China over a month in October and November last year.
The Article IV mission sends economists to member countries to monitor economic and financial policies and provide recommendations.
The IMF officials in their consultation with Chinese officials raised the topic of data transparency and had specifically pointed out the government suspending its youth unemployment data. Over the years, Chinese economic data has always been a topic of discussion among observers.
China’s representative executive director to the IMF, Zhang Zhengxin, disagreed with some of the findings in the report and in a written statement accompanying the report said: “The complexity, severity and uncertainty of the external environment are on the rise… However, comprehensively speaking, China’s economic development still has strong support and favourable conditions.”
