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    China GDP: IMF cuts growth forecast to 4.8%, warns property sector pressure a ‘prelude’ to broader slowdown

    The International Monetary Fund (IMF) on Tuesday cut its forecast for China’s economic growth in 2022 to 4.8 per cent, reflecting disruptions caused by the pandemic and pressure on the country’s property sector.

    The IMF slashed its growth forecast by 0.8 percentage points from the previous estimate in October, warning disruption in the housing sector has served as a “prelude to a broader slowdown”.

    “With a strict zero-Covid strategy leading to recurrent mobility restrictions and deteriorating prospects for construction sector employment, private consumption is likely to be lower than anticipated,” the IMF said in a report.

    China’s gross domestic product (GDP) grew by 8.1 per cent in 2021, the National Bureau of Statistics said last week, narrowly beating most market expectations and the government’s target of “above 6 per cent”.

    But GDP growth in the fourth quarter slowed to 4 per cent year on year, down from 4.9 per cent in the previous three months, hinting at more pain to come in 2022.

    The IMF downgrade echoed forecasts from major multinational investment banks and financial institutions.
    In December, the World Bank cut its forecast for China’s GDP growth this year from 5.3 to 5.1 per cent. Fitch Ratings slashed its growth forecast to 4.8 per cent for this year, down from 5.5 per cent in August. Goldman Sachs also cut its 2022 GDP growth forecast to 4.3 per cent, down from 4.8 per cent previously.

    “Growth across Greater China will slow in 2022 following its strong economic recovery in 2021,” said Andrew Fennell, senior director of Asia-Pacific sovereign ratings at Fitch Ratings.

    Lu Ting, chief China economist at Nomura, said in a report earlier this month that Beijing should set a more flexible GDP growth target at “around 5 per cent” for 2022, rather than “above 5 per cent” or “around 5.5 per cent.”
    “The pandemic itself is difficult to predict and there are lots of uncertainties, so it is not appropriate to set a bottom line at 5 per cent,” Lu said.

    The slowdown in China will drag on the global economic recovery, with spillovers to trading partners, the IMF report said.

    “If the real estate slowdown intensifies further and balance sheet stresses spread beyond property developers, exposed banks and other financial intermediaries may be forced to shrink credit to the broader economy,” the IMF said.

    “Such an outcome would hold back investment and consumption, dragging overall growth lower with adverse implications for commodity exporters and other emerging markets.”

    The IMF expects global growth to moderate from 5.9 per cent in 2021 to 4.4 per cent this year.

    Source : South China Morning Post

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