IMF cuts China’s GDP growth forecast, adding ‘the worst is yet to come’ for the global economy
- The International Monetary Fund has forecast China’s economy to expand by 3.2 per cent in 2022, slightly lower than its previous estimate
- The Washington-based institution left its global economic growth prediction unchanged at 3.2 per cent, but revised down its 2023 forecast
The International Monetary Fund (IMF) on Tuesday lowered its growth estimate for China’s economy this year, saying the country’s slowdown, the Ukraine war and inflation triggered by aggressive US monetary tightening are the three main headwinds facing the global economy.
In comparison, the IMF’s 2023 gross domestic product (GDP) growth estimates for the United States and India remained unchanged, at 1 per cent and 6.1 per cent, respectively.
China’s economic outlook is dimming due to a number of factors, including Beijing’s hardline zero-Covid policy, a property sector downturn and a volatile geopolitical situation.
That spells trouble for the rest of the world, according to the IMF, given China accounts for one-fifth of the global economy and is integral to supply chains.
Some 43 per cent of the world will experience at least two consecutive quarters of negative growth next year, the IMF said, while revising down the 2023 global growth forecast by 0.2 percentage points to 4.4 per cent. It kept this year’s estimate unchanged at 3.2 per cent.
“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” the report said.
The IMF warned that China’s property sector crisis will not only cause a cash crunch, but damage consumer spending and the balance sheets of local governments.
“This would be a large blow, given that the real estate sector makes up about one-fifth of GDP in China,” the report said.
In addition, frequent lockdowns aimed at stamping out coronavirus outbreaks have damaged the local and global economy, by weakening demand and putting pressure on supply chains.
“The impact of the pandemic is perhaps most keenly felt in China, where intermittent lockdowns in parts of the country have continued to affect economic activity,” the report said.
To illustrate its point, the IMF said China’s manufacturing capacity utilisation slowed to below 76 per cent in the second quarter, the lowest level in five years except during the acute phase of the coronavirus pandemic.
The IMF said Chinese authorities should hedge systemic financial risk by restructuring troubled property developers, and boost vaccination rates for the elderly to replace zero-Covid controls.