China's economy is expected to decline this year

The International Monetary Fund (IMF) has projected that the growth rate of the Chinese economy will decrease to 4.6% this year.

In a statement released by the IMF, it was mentioned that the fourth article consultation on the Chinese economy has been completed.

The statement highlighted that economic activity in China rebounded in 2023 after the COVID-19 pandemic, and the country's economy grew by 5.4% last year, meeting the target. The recovery was attributed to domestic demand, especially private consumption, and was supported by further monetary easing, tax cuts for businesses and households, and disaster relief spending, among other supportive macroeconomic policies.

The statement also pointed out that looking ahead, due to ongoing weakness in the real estate sector and weak external demand, growth is expected to decline to 4.6% in 2024.

In the medium term, the statement shared a forecast that growth would gradually decline further, anticipating approximately 3.4% growth in the country's economy by 2028, influenced by headwinds from low productivity and an aging population.

Regarding inflation, the statement expected a decline in 2023, largely due to decreases in energy and food prices. However, it predicted a gradual increase to 1.3% in 2024 with the narrowing of output gaps and diminishing base effects in commodity prices.

The statement emphasized the high uncertainties about the overall economic outlook, noting that a deeper contraction in the real estate sector than expected could further suppress private sector demand, worsen confidence, increase financial difficulties for local governments, and lead to deflationary pressures and negative macro-financial feedback loops.

Furthermore, the statement highlighted that more significant-than-expected weakening of external demand, tightening global conditions, and escalating geopolitical tensions pose significant downward risks.