The International Monetary Fund (IMF) has made a substantial upward revision to its Chinese growth rate for 2023, increasing it by 0.8 points from 5.2% – leaving its projection for 2024 at 4.5%. Additionally, they think that China’s reopening could be good news for the world economy. Unfortunately, this comes as the country’s Covid policy is relaxed, and their real estate sector remains burdened with high debt levels, still impacting overall economic progress.
China’s Flexibility in Covid Policies May Have Positive Results
The International Monetary Fund (IMF) recently upgraded China‘s growth projection for 2023 from 4.4% to 5.2%, primarily due to the prompt zero-COVID lockdown policies implemented in 2022, which ultimately decreased the country’s expansion rate to 3%. This was lower than the global average in over 40 years! Despite this short burst of energy brought by mobility among its people, it will soon expire and cease being effective.
On Monday, Pierre-Olivier Gourinchas, chief economist of the International Monetary Fund (IMF), declared that China‘s reopening would be an advantage to the world economy. The IMF also forecasted that Chinese economic growth is projected to diminish from 4.5% in 2024 to below 4% over a relatively long period as firms become less energetic and structural reforms move slowly onward.
China and India Can Fuel the World Economy
India’s economic outlook is still strong, with predictions that its growth in 2023 will drop to 6.1% but soon rebound to match 2022 performance at 6.8% in 2024. Gourinchas asserted that the two Asian juggernauts will generate more than 50% of global growth by 2023!
He noted that China‘s reopening might result in a rise in commodity costs; overall, he is optimistic about the effect this will have on the world economy. He believes it could help ease inflationary pressures and create additional demand from Chinese households. In spite of China‘s restarting, the IMF has reported that oil prices are projected to fall in both 2023 and 2024 because international growth is predicted to be weaker compared with 2022.
Keep reading: IMF Is Optimistic for the Global Economy