IMF: China will grow 5.4% but will slow down in 2024 due to real estate crisis and foreign demand

The chinese economy will grow 5.4% this year but will slow down to 4.6% in 2024 due to the “continued weakness” of the real estate market already a “off“demand coming from abroad, indicated today the International Monetary Fund (IMF).

In its annual evaluation of the state and prospects of the Chinese economy, the institution explained that, in the medium term, its projections involve a gradual decrease in the growth rate until it reaches around 3.5% by 2028 due to factors such as a “weak productivity” or the aging of the population.

Growth “fed via credit” of recent years has resulted in increasing imbalances and vulnerabilities, with savings rates “excessively high“which were used to finance investments in residential real estate and increasingly less profitable infrastructure,”resulting in high levels of debt“, indicated today the number two of the IMFGita Gopinath.

Regarding the situation in the real estate sector, although the organization applauded the government’s adjustment objectives in the market, Gopinath assured that the challenge will now be “minimize economic costs and contain risks to macrofinancial stability”.

“More is needed to ensure a faster recovery and minimize economic costs during this transition“said the deputy managing director of the IMF, who recommended accelerating the”exit” of economically unviable developers, eliminate impediments to real estate price adjustments, dedicate more government funds to completing unfinished developments and help developers who can survive “fix“your accounts and adapt to a market”smaller”.

“The risks continue to increase”

Likewise, Gopinath asked Beijing for reforms of the fiscal framework and restructuring of accounting balances to address the debt problem of local and regional governments, which accumulate a high level of liabilities, often through informal financing channels known as LGFV.

According to estimates from the IMF itself, these semi-public entities accumulate a total debt equivalent to about 9 trillion dollars, more than double that of 2017.

“Risks to financial stability are high and continue to increase as financial institutions have smaller capital buffers and face increasing asset quality risks.”Gopinath warned.

Within the framework of the recommended reforms, the IMF It also points out that Beijing should opt for more favorable macroeconomic policies to boost activity, including a reorientation of fiscal spending towards households, lower interest rates and greater flexibility in yuan exchange rates.

Lastly, Gopinath also asked the Chinese authorities to “demonstrate your commitment” with the international trading system and “help reduce fragmentation pressures“, something for which they should”reduce trade and investment distortions from their national industrial policies and trade restrictions”.