The global lender's new projections come as Beijing steps up
efforts to shore up an uneven recovery in the world's second-biggest economy,
which has stumbled in the face of a protracted property crisis and its ripple
effects across investors, consumers and businesses.
The IMF said it had revised up both its 2024 and 2025 GDP
targets by 0.4 percentage points but warned that growth in China would slow to
3.3% by 2029 due to an ageing population and slower expansion in productivity.
It now expects China's economy to grow 5% in 2024 and to
slow to 4.5% in 2025.
"The upgrade that we have for this year mainly reflects
the fact that first quarter GDP growth came in stronger than expected, and
there were some additional policy measures that were recently announced,"
IMF's First Deputy Managing Director Gita Gopinath said in Beijing.
Gopinath was speaking at a press conference to mark the
conclusion of the fund's annual review of China's economic policies.
The IMF's upgrade for 2024 is in line with Beijing's growth
target of "around" 5%, which the economy appears to be on track to
reach after it blew past expectations to post growth of 5.3% in the first
quarter. But deflationary pressures continue to loom large and a protracted
property crisis remains a major drag on growth.
A Reuters poll that was completed before the first quarter
GDP data had forecast China's 2024 growth at 4.6%, but many economists have
upgraded their projections since the release of the stronger numbers.
In a note to clients on Monday, BNP Paribas said it expected
China to hit its 5% growth target, while Goldman Sachs last month raised its
forecast for 2024 to 5% from 4.8% in November. Citi also raised its own
forecast to 5% from 4.6% in March. All of them cited the strong first quarter
data.
PROPERTY RISKS
China's stuttering post-COVID recovery has dragged on stock
markets and the Chinese yuan, with several rounds of policy support measures
yet to translate into robust demand.
The property sector crisis remains the biggest stumbling
block to a full-blown economic revival, analysts say, and the IMF issued a
warning about the risks ahead.
"Risks to the outlook are tilted to the downside,
including from a greater or longer-than-expected property sector readjustment
and increasing fragmentation pressures," Gopinath said.
"The ongoing housing correction, which is necessary for
steering the sector to a more sustainable path must continue," she added.
"We see scope for a more comprehensive policy package to address the
property sector issues."
China this month unveiled 'historic' steps to stabilise the
property market, but analysts say the measures fall short of what is required
for a sustainable recovery.
Gopinath said central government resources should be
deployed to help those who have purchased pre-sold unfinished homes, since this
would "pave the way for the exit of insolvent developers from the property
market, allowing for greater price flexibility and helping restore
equilibrium."
The IMF expects core inflation in China to increase to
average around 1% this year, she added.
A string of recent economic indicators for April including
factory output, trade and consumer prices suggest the $18.6 trillion economy
has successfully navigated some near-term downside risks, but China observers
say the jury is still out on whether the bounce is sustainable.
Retail sales in April, for instance, grew at their slowest
pace since December 2022, when Beijing's strict zero-COVID curbs were in place,
while new home prices fell at their fastest rate in nine years.
Gopinath said that the IMF had "found trade offs
between supporting domestic demand, mitigating inflation risks and managing
unfavourable debt dynamics" and welcomed the monetary policy steps China's
central bank has taken so far this year.
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