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IMF Tips 3.2% Global Growth, Warns China on Property Crisis

IMF chief economist says China’s economy is strained by its property crisis and warns that domestic demand will stay weak until strong action is taken to remedy that

A participant stands near a logo of IMF at the International Monetary Fund - World Bank Annual Meeting in this file Reuters image from 2018 in Bali, Indonesia.


The International Monetary Fund on Tuesday issued its latest World Economic Outlook along with national forecasts – and advice for China on ways to alleviate ongoing impacts from its protracted property crisis.

Chief economist Pierre-Olivier Gourinchas said China’s economy is weighed down by the downturn in its property sector and warned that “domestic demand will remain lacklustre unless strong measures address the root cause” and monetary policy becomes more accommodative.

The IMF recommended that China speed up the closure of developers that are no longer viable, and push to complete unfinished housing projects, plus support for vulnerable households to help restore consumer demand


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In its report, the IMF said it believes US economic strength should help the world achieve slow but steady growth this year and overcome headwinds from lingering high inflation, weak demand in China and Europe, plus negative impacts from regional wars.

It forecast global real GDP growth of 3.2% for 2024 and 2025 – the same rate as in 2023. The 2024 forecast was revised up by 0.1 percentage point from the previous estimate in January, largely due to a significant upward revision in the US outlook.

“The global economy continues to display remarkable resilience with growth holding steady and inflation declining, but many challenges still lie ahead,” Gourinchas told reporters.


China could also face trade retaliation

The IMF left unchanged its forecast for China’s 2024 growth to fall to 4.6% from 5.2% in 2023, with a further drop to 4.1% for 2025.

But it warned that the lack of a comprehensive restructuring package for the country’s troubled property sector could prolong a downturn in domestic demand and worsen China’s outlook.

Such a situation could also intensify deflationary pressures, leading to a surge in cheap exports of manufactured goods that could stoke trade retaliation by other countries – a scenario that Yellen warned about during a trip to China earlier this month.

Gourinchas said, however, that China’s stronger-than-expected first-quarter growth may prompt an upward revision to the outlook.


Concern over Middle East conflict

A potential escalation of the Middle East conflict after Iran’s rocket and drone attack on Israel could have a “strong effect” on limiting growth, he said, adding that it would raise oil prices and inflation, triggering tighter monetary policy from central banks.

The US Treasury is preparing to hit Iran with new sanctions in coming days that could limit its ability to export oil, US Treasury Secretary Janet Yellen said on Tuesday.

The report described an “adverse scenario” in which a Middle East escalation would lead to a 15% increase in oil prices and higher shipping costs would hike global inflation by about 0.7 percentage points.

The IMF forecast that global median headline inflation will fall to 2.8% by the end of 2024 from 4% last year, and to 2.4% in 2025.


US, Europe diverge

The IMF revised its forecast for 2024 US growth sharply upward to 2.7% from the 2.1% projected in January, on stronger-than-expected employment and consumer spending. It expects the delayed effect of tighter monetary and fiscal policy to slow US growth to 1.9% in 2025, though that also was an upward revision from the 1.7% estimate in January.

European Central Bank president Christine Lagarde has cited the stark divergence between the US and Europe, which is facing slower growth and faster-falling inflation.

The latest IMF forecasts bear this out, with a downward revision to the euro zone 2024 growth forecast to 0.8% from 0.9% in January, primarily due to weak consumer sentiment in Germany and France. Britain’s 2024 growth forecast was revised down by 0.1 percentage point to 0.5% amid high interest rates and stubbornly high inflation.

But the global lender noted bright spots in some big emerging market countries, raising its growth forecast for Brazil in 2024 by half a percentage point to 2.2% and increasing the forecast for India’s growth by 0.3 percentage point to 6.8%.

It noted that Group of 20 large emerging market countries are playing a bigger role in the global trading system and have the capability to shoulder more of the growth burden going forward.

But the IMF said low-income developing countries continue to struggle with post-pandemic adjustments and greater levels of economic “scarring” than middle-income emerging markets. As a group, these low-income developing countries saw their 2024 growth forecast cut to 4.7% from an estimate of 4.9% in January.


Russian resilience

In one of the biggest surprises, Russia’s 2024 growth forecast was increased to 3.2% from the 2.6% projected in January.

The report said the increase partly reflected continued strong oil export revenues amid higher global oil prices despite a price-cap mechanism imposed by Western countries, as well as strong government spending and investment related to war production, along with higher consumer spending in a tight labor market.

The IMF also upgraded Russia’s 2025 growth forecast to 1.8% from 1.1% in January.

Ukraine’s growth, which is highly dependent on economic aid from the West, is forecast to slow to 3.2% in 2024 and accelerate to 6.5% in 2025.

While initial price spikes for grains, oil and other commodities have faded since Russia’s 2022 invasion of Ukraine, a widening of the conflict could cause them to intensify.


  • Reuters with additional input and editing by Jim Pollard


NOTE: The headline on this report was amended on April 17, 2024.



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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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