IMF projects China’s growth to gradually decline to 3.3 percent in 2029

(MENAFN) The International Monetary Fund (IMF) has projected that China’s economic growth will gradually decline over the medium term, reaching approximately 3.3 percent by 2029. This forecast reflects challenges stemming from sluggish productivity growth and an aging population. Despite these challenges, China has demonstrated resilience, with its economy growing by 5.2 percent in 2023 and maintaining a rate of 5 percent annually in the first half of 2024. This robust performance has been largely attributed to substantial public investment, a rebound in private consumption following the COVID-19 pandemic, and a recent boost from net exports.

The IMF’s Staff Concluding Statement of the 2024 Article IV Mission highlights that while growth has been strong, inflation has remained subdued in recent quarters due to persistent economic slack. The report suggests that inflation is likely to increase gradually as the output gap narrows and the effects of declining commodity prices diminish. However, the IMF also points out potential risks, including a deeper-than-anticipated contraction in the property sector and high levels of debt, which could result in prolonged disinflationary pressures and adverse macro-financial feedback loops.

External risks to China’s economic outlook include a possible greater-than-expected weakening of external demand and heightened fragmentation pressures. These factors could pose significant challenges to the economy. Nevertheless, there are potential upsides if the Chinese government undertakes decisive policy actions. Specifically, measures to facilitate adjustments in the property sector or implement market-oriented structural reforms could enhance economic confidence and lead to better-than-expected outcomes.

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