Economists Slash China’s Growth Outlook Even Further
April 19, 2022
The International Monetary Fund (IMF) has slashed its growth forecast for China for the second time in three months, as widespread Covid lockdowns and Russia’s invasion of Ukraine weigh down the world’s second-largest economy.
The IMF now expects the Chinese economy to grow by 4.4% this year, down from a 4.8% growth rate projected in January and 5.6% in October.
Current projections would put economic growth below Beijing’s 5.5% growth target.
Official figures from China show that the economy grew at a better-than-expected rate of 4.8% in the first quarter. That economic momentum stalled out, however, in March, when weeks-long lockdowns in major cities like Shanghai disrupted supply chains and weakened consumer demand.
China also faces headwinds from the weakening overseas demand and surging commodities prices, both of which have been exacerbated by the war in Ukraine.
The IMF warns that a sustained slowdown could destabilize the nation’s financial system, as debt-laden local governments, property developers, and even households may have trouble repaying debts, and foreign investors pull money out of the economy.
To stimulate economic activity, Beijing has stepped up monetary and fiscal easing, cutting interest rates and banking reserve requirements, hoping to spur further lending and getting local governments to increase infrastructure-related spending. President Xi has also paused his aggressive economic reforms that led to a crackdown on the nation’s tech companies and unsettled overseas investors in recent months.