The growth of China this 2023 will contribute to world growth. However, the agency reiterated that this positive forecast “is subject to considerable uncertainty”, so it is advisable not to tighten macroeconomic policies.
He International Monetary Fund (IMF) this Friday, February 3, advised China to continue relaxing its monetary policy. This after the review of growth prospects for the Asian country showed an improvement for 2023. However, a slowdown was confirmed for 2024.
Along these lines, the agency detailed that its growth forecast in the region for this year rose to 5.2%, the same as the expectation for 2022, which advanced to 3%. This was mainly driven by the recovery in private consumption after the reopening of the country, leaving behind the “zero covid” policies.
However, Thomas Helbling, deputy director of the IMF’s Asia-Pacific department, warned that “this growth forecast is subject to considerable uncertainty”, due to the possibility of future waves of covid-19 infections and the unexpected slowdown of the real estate market in the country.
Likewise, the Chinese reopening could lead to increasing inflation risks that remain low for the second largest economy in the world, Helbling pointed out.
Finally, the agency estimates that China’s growth in 2023 will contribute to world growth and that it will have a particularly positive effect on countries in the region, such as Thailand or the Philippines, due to the increase in tourism.
It should be noted that by 2024, however, experts foresee a constant slowdown in the Asian economy, which will grow below 3% from 2026.
Recommendations to China
Despite the good prospects for 2023, the agency expects China to continue this year with a negative output gap —this occurs when real GDP is less than potential. For this reason, the IMF encourages the country’s authorities not to tighten macroeconomic policies too soon.
In this way, it recommends maintaining a neutral fiscal policy, focused especially on households, and continuing to relax monetary policy, since inflationary pressures are currently very low and the Chinese economy is operating below its potential.
The experts also spoke about the restrictions on the purchase of semiconductors imposed by the United States, to try to prevent the Asian giant from developing Artificial Intelligence or next-generation quantum computing projects.
Helbling referred to the dangers of contributing to geo-economic fragmentation and the danger of fragmenting supply chains, which could lead affected countries to suffer considerable losses in their GDP: “Because of these risks, we have emphasized that large economies should work together,” said the researcher.
Source: Larepublica
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