IMF Hikes China's 2023 Outlook to 5.2% as Consumption Rebounds
Du Chuan
DATE:  May 12 2023
/ SOURCE:  Yicai
IMF Hikes China's 2023 Outlook to 5.2% as Consumption Rebounds IMF Hikes China's 2023 Outlook to 5.2% as Consumption Rebounds

(Yicai Global) May 12 -- China's economy is expected to expand by 5.2 percent this year, accelerating growth amid post-Covid reopening that is fueling consumption, according to the raised forecast of the International Monetary Fund.

The core financial agency of the United Nations recently hiked its forecast of China's gross domestic product growth to 5.2 percent from the earlier 4.4 percent envisioned in October as first-quarter data further confirmed optimistic expectations. The accelerating pace shows the country is overcoming the pandemic as in 2022, the GDP rose by 3 percent.

Recovery is predicted to cross borders. When China's economy grows by 1 percent, the rest of Asia should expect a sympathetic 0.3 percent boost, per the report. The spillover effect is changing though as earlier it was primarily caused by investment demand and now the strengthening effect mainly consists of China’s increased demand for consumption and services.

But the real estate market still lacks momentum. Although previous policies have stabilized the situation, there are still problems, according to Krishna Srinivasan, director of the Asia and Pacific department. China should roll out more comprehensive policies as some property developers need more support, Srinivasan added.

However, Peng Wensheng, chief economist of China International Capital, said to Yicai Global that real estate should not be used as fuel for short-term stimulus. A possible housing boom would be good for short-term growth but counterintuitive to medium or long-term expansion, Pend added.

The property industry has strong cyclical factors, and strong policy is required to change these cycles, Peng said, adding that if the housing market becomes a counter-cyclical adjustment tool to drive the economy it is inevitable that the policy will go to extremes, resulting in adverse effects.

Still, the property sector has great potential in the medium and long term and can become more healthy and sustainable, according to Xing Ziqiang, chief economist of Morgan Stanley China.

For the Asia Pacific region, the IMF revised its GDP growth forecast to 4.6 percent from the previous estimate of 4.3 percent, primarily driven by China's recovery and India's resilient growth. In 2022, the region logged a 3.8 percent boost.

Editor: Emmi Laine, Xiao Yi

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Keywords:   IMF,Asia Pacific region,Economy growth,China,GDP,2023,Outlook,Covid,Recovery