The International Monetary Fund (IMF) has revised its economic growth forecast for China in 2023 to 5.4%, a 0.4 percentage point increase from its October projection. The revision is attributed to China's stronger-than-expected growth in the third quarter and a series of recently released policies.
According to the latest report from The Paper on Tuesday, Gita Gopinath, the First Deputy Managing Director of the IMF, indicated at the conclusion of the 2023 Article IV Consultation Mission to China that the Chinese economy is expected to meet the government's growth target for 2023, reflecting a robust recovery following the COVID-19 pandemic.
Earlier data released by China's National Bureau of Statistics showed that the country's GDP grew by 4.9% year-over-year in the third quarter, surpassing market expectations of 4.5%. The Bureau stated that as long as growth exceeds 4.4% in the fourth quarter, the annual target of approximately 5% is attainable.
In recent weeks, China has introduced a series of supportive policies to stabilize the housing market and resolve local government debt issues. Additionally, the country has unusually issued one trillion yuan in special government bonds for post-disaster reconstruction and other works.
Regarding inflation, Gopinath mentioned that with the output gap continuing to narrow, China's core inflation is expected to rise to 2.1% by the end of 2024.
The IMF believes that China will not experience deflation and that the current inflation rate remains within a reasonable range.
Gopinath emphasized that more actions are needed to support the real estate market to accelerate recovery and reduce the economic costs of the transition. A comprehensive package of policy measures should include: accelerating the exit of unsustainable real estate developers; removing barriers to housing price adjustments; providing more government funding to promote housing completion; and assisting sustainable developers in repairing their balance sheets to adapt to a downsized market.
Furthermore, the central government should undertake coordinated fiscal framework reforms and balance sheet restructuring to address local government debt pressures. This includes bridging local government fiscal gaps, controlling debt flows, and developing a comprehensive restructuring strategy to reduce the debt levels of local government financing platforms.
Additionally, in an interview with a media outlet on Tuesday, Gopinath suggested that if China could raise its medium-term growth forecast from the current 3.5% to a significantly higher figure and implement the right reforms, it would have a more substantial impact.
In the interview, Gopinath also referred to China's strategy for high-quality development:
China is aiming for high-quality, sustainable, and inclusive economic growth, and they are working on multiple fronts to achieve this.
The IMF also raised its economic growth forecast for China in 2024 from the 4.2% predicted in October to 4.6% on Tuesday.
