The Asian Development Bank (ADB) stated this Wednesday that the current real estate crisis in China may hamper its economic growth in 2024, although the impact can be alleviated or avoided with the right policies.
In a report on economic forecasts, the ADB noted however that in the scenario that the crisis continues the impact on other developing economies in Asia and other parts of the world will be limited, except for cases such as the mining sector in Mongolia.
“Analysis shows that continued weakness in the housing market could slow the local economy, but active policies could alleviate or even prevent its impact on growth.“, indicated the multilateral entity, based in Manila.
Thus, the BAD He specified that the adjustment of the real estate sector due to the contraction of investment, sales and prices in the Asian giant will not affect its expected growth this year at 4.9%, but it could have an impact next year, when its gross product is expected to domestic (GDP) increases by 4.5%.
The organization proposed measures to alleviate the real estate crisis such as reducing loan interest, regulation to boost mortgages and applying fiscal stimuli to support demand and the sector.
The authors of the report assured that a decisive commitment to these measures would represent a small part of the stimuli approved by the Chinese Government after the crisis of 2009 and 2010.
“Authorities should seek to articulate a soft landing by providing a floor for market adjustment to avoid a significant short-term contraction, as well as continue pursuing the long-term goal of a more structured and balanced real estate sector.”, pointed out the ADB experts.
The real estate industry accounts for between 21 and 23-24% of GDP in China and, in addition to being a common savings asset among Chinese citizens, it is closely linked to the financial sector, since a quarter of loans are allocated to mortgages or builders, according to the report.
The ADB noted that the sector began to weaken due to policies in 2020 so that construction had less weight in the economy and the drop in demand during the COVID-19 pandemic.
The real estate crisis in China has affected the country’s main housing developers, Evergrande and Country Garden, which have suffered in recent months million-dollar losses, the accumulation of debts and non-payments to lenders.
Source: Gestion
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