IMF Raises China's GDP Growth Forecast for 2023 to 5.4%, Warns of Slowing 2024 Growth Amid Property Sector Weakness

Upgraded forecast reflects stronger third quarter outcomes and recent economic policy changes; IMF deputy managing director stresses need for a comprehensive recovery strategy amid rising financial instability and property market weakness.

• The IMF has raised its growth forecast for China's GDP in 2023 to 5.4%, citing stronger than expected third quarter outcomes and recent policy changes. The country's central bank governor anticipates hitting the set economic growth target of around 5% for this year with an emphasis on high-quality and sustainable development.
• Although an upward revision, the IMF warns of slowed growth in 2024 due to a weakened property sector and subdued external demand. It is expected to slow to 4.6% in 2024, and continually slow to roughly 3.5% by 2028 amid weak productivity and population aging.
• The IMF recommends a comprehensive recovery strategy to address China's rising financial instability and the weak property market. This includes accelerating the exit of nonviable property developers, removing housing price adjustment impediments and allocating additional central government funding for housing completion.
• China's local government debt, now calculated to be 92 trillion yuan or roughly 76% of economic output in 2022, has been pinpointed as a significant challenge. The IMF suggests the implementation of coordinated fiscal framework reforms and balance-sheet restructuring to address debt strains. China's central bank is currently providing liquidity support to areas with high debt.
• The financial instability within the country is considered to be 'elevated and still rising' due to financial institutions having lower capital buffers and increasing asset quality risks. It's prompted the need for policy changes that have thus far contributed to the improved growth forecasts.

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