The International Monetary Fund has turned a bit bullish on China’s economic outlook.
On Wednesday, the Fund lifted its estimate for China’s growth this year to 5%, which aligns with the forecast from the government of President Xi Jinping.
The IMF stated that the upward revision, from the previous estimate of 4.6%, was due to what the Fund described as “strong” first-quarter figures and recent policy measures in property announced on May 17.
China’s economy grew by a better-than-expected 5.3% in the first quarter, supported by strong exports but undermined by crashing property prices, sales, investment, and spending by clients and companies in the sector. This growth was slightly stronger than the 5.2% seen in 2023. Even after the latest upgrade, the IMF does not anticipate substantial economic growth in China this year and next, more akin to marking time.
The GDP estimate for 2025 was raised to 4.5%, up from the previous forecast of 4.1%.
Gita Gopinath, the IMF’s first deputy managing director, said in a statement that the recent real estate policy moves are “welcome,” but emphasized that more comprehensive action is needed. “The priority should be to mobilize central government resources to protect buyers of pre-sold unfinished homes and accelerate the completion of unfinished presold housing, paving the way for resolving insolvent developers,” she said. “Allowing for greater price flexibility, while monitoring and mitigating potential macro-financial spillovers, can further stimulate housing demand and help restore equilibrium.”
The IMF release mentioned that during her visit to China this month, Gopinath met with People’s Bank of China Governor Pan Gongsheng, Ministry of Finance Vice Minister Liao Min, Ministry of Commerce Vice Minister Wang Shouwen, PBOC Deputy Governor Xuan Changneng, and National Financial Regulatory Administration Vice Chairman Xiao Yuanqi.
“Near-term macroeconomic policies should be geared to support domestic demand and mitigate downside risks,” Gopinath stated. “Achieving high-quality growth will require structural reforms to counter headwinds and address underlying imbalances.”