China GDP: IMF says 5.2 per cent economic growth possible this year after Covid-battered 2022

IMF’s World Economic Outlook Update, released Tuesday, also reflects a much more optimistic outlook for US economy than was expected three months ago

Nonetheless, a number of downside risks originating from China could still adversely affect the global economy in 2023

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The IMF says China’s reopening has improved the global economic outlook for this year after a tumultuous 2022. Photo: Reuters

Published: 9:30am, 31 Jan 2023Updated: 12:50pm, 31 Jan 2023

The International Monetary Fund has upgraded its forecast for China’s 2023 gross domestic product (GDP) to 5.2 per cent, owing to the nation’s full reopening, and such growth is expected to have significant implications as the broader global economy is expected to slow as a result of inflation and the continued impacts of the Ukraine war.

The US and India, for instance, are expected to see their year-on-year economic growth rates slow to 1.4 and 6.1 per cent, respectively – down from last year’s growths of 2 and 6.8 per cent, according to the IMF’s World Economic Outlook Update released on Tuesday.

The world’s second-largest economy fell short of expectations last year as it grew by just 3 per cent. This marked the first time in more than 40 years that China’s GDP failed to reach the global average, which was roughly 3.4 per cent for 2022, the IMF said.

“The restrictions and Covid-19 outbreaks in China dampened activity last year. With the economy now reopened, we see growth rebounding to 5.2 per cent this year as activity and mobility recover,” said Pierre-Olivier Gourinchas, the IMF’s chief economist.

Pent-up demand that accumulated during China’s strict handling of the pandemic could lead to a stronger rebound in the country, the report noted.

Still, there are a number of downside risks originating from China that will impact the global outlook. One of which is the country’s economic recovery stalling due to the rampant spread of Covid-19 since last month. The Chinese population’s immunity levels remain low, and many hospitals have been struggling to handle the subsequent surge in patients, especially outside major urban areas.

Another major source of vulnerability for the global economy is China’s strained real estate market. Weak consumer demand and supply-chain issues could also have spillover effects on the rest of the world.