The International Monetary Fund (IMF) has lowered its economic growth projections for China for 2023 and 2024, attributing the decline to a slowdown in the real estate sector and weakening consumer confidence. The IMF has recommended that China transition from an investment-driven model to consumption-led growth to counter the economic stagnation.
Despite efforts to shift towards consumption-led growth, demand continues to be weak, as observed by Krishna Srinivasan of the IMF. Confidence issues in the real estate sector have further undermined this shift. The IMF has revised its growth predictions for China’s economy down to 5% in 2023 and 4.2% in 2024, highlighting that slower Chinese growth poses a significant global economic risk.
Economists at Maybank anticipate an even slower recovery for China, projecting a growth rate of 4.8% this year. This is due to fading “revenge spending” and weaker consumer spending than pre-pandemic levels, with signs of fatigue evident during China’s “Golden Week” holiday.
In contrast to China’s economic downturn, the IMF expects India’s economy to grow by 6.3% in 2023 due to pent-up demand and positive sentiment. However, these forecasts are also influenced by the impact of the pandemic and structural changes due to an aging population.
On a global scale, growth is expected to slow from 3.5% in 2022 to 3% in 2023. The IMF warns that China’s slower growth is an “important risk for the global economy”.
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