China's Real Estate Weakness to Impact Asian Growth, says IMF

The International Monetary Fund (IMF) lowered its growth projections for China for 2023 and 2024, noting that the country's recovery was "losing steam" and pointing to weakness in the country's real estate market. In a report on the regional economy released on Oct18, the IMF predicted that the world's second-largest economy would grow by 5% this year and 4.25% the following year, down from its April forecast of 5.25% and 4.55%.

"In China, the recovery is losing steam, with manufacturing purchasing managers' indexes entering contracting territory from April to August and conditions in the real estate sector weakening further," the report stated.

The report projected that a prolonged housing market correction in China would in the near-term "trigger greater financial stress among property developers and larger asset quality deterioration".

The impact of that could cause China's gross domestic product (GDP) to decline by as much as 1.6 per cent percent relative to the baseline by 2025, while world GDP would decline by 0.6 per cent relative to the baseline, it added. The IMF's outlook for Asia and the Pacific in 2023 was more optimistic, calling it "the most dynamic region this year."

The agency maintained its previous growth forecast for the region at 4.6 percent in 2023, and stated that economic activity in the region was on track to contribute roughly two-thirds of global growth this year.

However, growth in Asia and the Pacific is expected to slow to 4.2% next year. The IMF expects it to fall further in the medium term to 3.9 percent, the lowest in the last two decades except for 2020, as China's structural slowdown and weaker productivity growth in many other economies weigh on the region.