China’s recovery could be very fast, says IMF’s Gopinath

China could see a strong recovery in economic growth starting in the second quarter based on current infection trends after the dismantling of most COVID-19 restrictions, IMF Deputy Managing Director Gita Gopinath said on Wednesday.

“We expect growth in China to return, pick up”, Gopinath told Reuters in an interview at the World Economic Forum in Davos, Switzerland.

“Looking at infection trends, and if they persist, we could see a very rapid recovery starting after the first quarter of this year.”, he maintained about a current increase in infections seen as a “exit wave” linked to the economic reopening.

China’s economy grew 3.0% in 2022, one of its worst results in nearly half a century, hit by tight COVID restrictions and a slump in the housing market.

Economists polled by Reuters see China’s growth in 2023 at around 4.9%, with some of them recently upgrading forecasts to around 5.5%.

Gopinath said that a growth rate “in the range of more than 4%would likely mean that any global inflationary pressure would be offset by slowing demand elsewhere.

“But if growth in China comes in much stronger, which is a possibility, then we could see another spike in oil or energy prices.”, he remarked.

Asked about recent US inflation readings that suggest cooling, Gopinath said it’s too early to say for sure whether they mean inflation was durably heading toward the Fed’s 2% target.

“If we get readings similar to what we’ve seen in the last month or two for a few months, we’ll be in a good place.”, he said, noting that the labor market remained tight.

Source: Reuters