(Yicai Global) Jan. 26 -- The International Monetary Fund has downgraded China’s gross domestic product growth expectation for this year by 0.8 percentage point as the tightening of global financial conditions is affecting all countries, including China, the organization’s chief economist told Yicai Global today.

The IMF reset China’s projected 2022 economic growth rate at 4.8 percent and lowered that of the world by 0.5 percentage point to 4.4 percent in its latest Global Economic Outlook Report released yesterday.

"We are entering a period where global interest rates will start going up as central banks around the world begin hiking rates," Gita Gopinath said. “This can create headwinds for the recovery for some emerging and developing economies," she added.

"There are countries that have large amounts of foreign exchange reserves and don't rely much on foreign currency borrowing. These are in better shape than countries that do have large amounts of external financing which rely on short-term foreign exchange borrowing," she added.

Although China has reached an advanced stage of recovery, recent developments are feeding into the forecast cut, she said. “The downgrade reflects continued retrenchment in the real estate sector and weaker than expected recovery in private consumption,” the report said.

"I would suspect that these factors, in terms of dealing with the pandemic, in terms of the real estate sector, would be bigger factors in our baseline for determining growth in China," she added.

The US Federal Reserve is widely expected to hike interest rates for the first time in over three years at its first monetary policy meeting this year on Jan. 27. It will also provide more details on unwinding the balance sheet.

Editor: Kim Taylor