IMF raises growth outlook for developing Asia, but warns of China property risks
The International Monetary Fund (IMF) has upgraded its growth forecast for developing Asia economies in 2024, thanks to strong performance by India and higher government spending by China. However, it also cautioned that China’s property sector crisis could pose a threat to the region’s recovery.
In its latest World Economic Outlook report, the IMF projected that emerging economies in Asia would expand by 5.2% this year, up from 5.4% in 2023 and 0.4 percentage point higher than its previous estimate in October. It attributed the revision to India’s resilient domestic demand and China’s fiscal stimulus to cope with natural disasters.
India, the region’s second-largest economy, is expected to grow by 6.5% in both 2024 and 2025, reflecting a 0.2 percentage point increase from the IMF’s October forecast. The IMF praised India’s vaccination progress and policy support, but also urged the country to address its fiscal and financial vulnerabilities.
China, the region’s largest economy, is also forecast to grow by 4.6% in 2024, up from 4.2% in 2023 and 0.4 percentage point higher than the IMF’s previous projection. The IMF said China’s growth was boosted by stronger-than-expected momentum in the second half of last year and increased public investment.
However, the IMF also warned that China’s property sector woes could dampen the region’s growth prospects, as well as those of its trading partners. It said that real estate investment in China could decline more sharply and for longer than anticipated, dragging down domestic consumption and output.
The IMF also highlighted the risk of unintended fiscal tightening in China, as local governments face financing constraints amid the property downturn. It urged China to implement comprehensive restructuring policies to address the root causes of the property sector problems and to support consumer confidence and demand.
The IMF said that China could achieve a stronger recovery if it pursued property sector reforms or provided larger-than-expected fiscal support. It also noted that China’s property sector crisis had prompted the authorities to announce measures to improve the liquidity of property developers, such as easing bank lending rules and allowing bond issuance.
The IMF also raised its global growth forecast for 2024, citing the unexpected strength of the U.S. economy and the fiscal support measures in China. It expects the world economy to grow by 3.1% this year, up from 2.9% in 2023 and 0.2 percentage point higher than its October projection. It also expects a 3.2% expansion in 2025.
The IMF’s chief economist, Pierre-Olivier Gourinchas, told CNBC that the global economy had shown remarkable resilience in the second half of last year, and that this would carry over into 2024. He also said that the IMF expected global inflation to moderate this year, as supply bottlenecks ease and demand pressures subside.
The IMF projected that global inflation would fall from 6.2% in 2023 to 5.8% in 2024 and 4.4% in 2025. It said that inflation in advanced economies would decline from 4.6% in 2023 to 2.6% in 2024, while inflation in emerging economies would drop from 8.4% in 2023 to 8.1% in 2024.
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