China’s aspirations to outpace the US as the leading global economy have been cast into doubt due to contrasting growth realities and future prospects, according to the International Monetary Fund’s (IMF) “World Economic Outlook” released on Tuesday. The depreciation of the yuan and a downward revision of China’s expected expansion for 2023 and 2024 contribute to this uncertainty. In contrast, the IMF has revised its estimates upwards for the US for these same years.
The IMF report also highlights China’s struggle with a real estate crisis, declining confidence, and stringent Covid-19 mobility restrictions. These factors have led to a significant shortfall in consumption compared to other emerging markets and developing economies.
In a broader view, the IMF’s latest economic forecasts illustrate the resilience of the global economy amidst challenges such as inflation, disparities between nations, geopolitical uncertainties, shrinking government budgetary room, falling public spending, and volatile commodity markets. Global growth is projected at 3% in 2023 and 2.9% in 2024 – figures virtually unchanged from the IMF’s previous estimates.
Despite these challenges, developing countries are expected to maintain 4% growth in 2023. However, wealthy countries will see a drop to 1.5%. The US is experiencing sustained growth, which starkly contrasts with the significantly slowed economy of the Eurozone. Among emerging economies, China has been overtaken by Brazil and India due to a decline in global demand and a severe real estate crisis.
Inflation is another key aspect of the IMF’s report. Price rises are projected to reach 5.9% by Q4 2023, down from 9.5% in Q3 2022. This decrease is attributed to factors including falling commodity prices, despite historically low unemployment rates. The IMF encourages continued tightening of monetary policies until inflation is sustainably brought back towards its targets.
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