IMF Cuts China Growth Forecast, Warning of Worsening Property Crisis
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China's growth forecast for 2024 has been downgraded by the International Monetary Fund (IMF), which cites a deepening property crisis as a key risk to the global economic outlook, CNBC reports. The organization now predicts China's economy will expand by 4.8% this year, down 0.2 percentage points from its July estimate.
The IMF's World Economic Outlook report, released Tuesday, warns that China's property market contraction could be more severe than previously anticipated. The report highlights the risk of further price corrections and dwindling sales and investments in the sector.
"Conditions for the real estate market could worsen," the report states, drawing parallels to historical property crises in Japan and the U.S. Unresolved issues in the Chinese market could further depress prices, leading to eroded consumer confidence and weakened domestic demand.
The IMF's warning comes despite recent efforts by Beijing to stabilize its flagging economy and troubled property market. The People's Bank of China announced a series of support measures in September, including easing banks' cash reserve requirements. Shortly after, top Chinese leaders pledged to halt the property slump and encourage recovery, prompting major cities like Guangzhou and Shanghai to unveil measures aimed at boosting homebuyer confidence.
Earlier this month, Finance Minister Lan Fo’an hinted at further stimulus, suggesting increased debt and deficit spending. Meanwhile, the housing ministry announced an expansion of its "whitelist" for real estate projects, aiming to accelerate bank lending for unfinished developments.
While acknowledging these measures, IMF Chief Economist Pierre-Olivier Gourinchas told CNBC that their impact on the 4.8% and 4.5% growth projections for 2024 and 2025, respectively, remains uncertain.
"They are certainly going in the right direction, not enough to move the needle," Gourinchas stated, adding that the effectiveness of recent support measures requires further assessment.
China's recent economic performance underscores the challenges ahead. Last week, the country reported third-quarter GDP growth of 4.6%, marginally exceeding analyst expectations but still reflecting underlying weakness.
The IMF report also cautions about potential downsides to government intervention. Increased stimulus could strain public finances, while sector-specific subsidies aimed at boosting exports risk escalating trade tensions with China's trading partners.