IMF Predicts Continued Economic Slowdown in China until 2028

The International Monetary Fund (IMF) predicted on Friday that the Chinese economy will continue to slow down in the coming years, as the giant Asian nation grapples with declining productivity and an aging population.

The second largest economy in the world recorded one of the slowest growth rates in years last year, due to the ongoing real estate debt crisis, geopolitical tensions, and global demand weakness.

A report by the International Monetary Fund on Friday predicted that growth will decline to 3.5% by 2028, “due to headwinds from weak productivity and aging population.” It added that “the uncertainty regarding economic forecasts is very high.”

The fund was previously expected to record a growth rate of 4.6% during the current year.

This slowdown is primarily due to the ongoing real estate crisis that has been going on for years, a sector that used to be one of the main drivers of growth in the country but is now suffering under the burden of debt that could threaten the entire Chinese financial system.

The real estate giant, Evergrande, has become a symbol of the challenges faced by this sector, as it has accumulated massive debts exceeding 300 billion dollars.

During this week, a court in Hong Kong issued an order that would initiate the liquidation of Evergrande’s assets abroad, while the company confirmed that this decision will not affect its operations within China.

The International Monetary Fund report warned that the continued slowdown in the real estate market “could further weigh on individual demand and exacerbate the trust crisis.”

The head of the International Monetary Fund’s mission in the Asia-Pacific region, Sonali Jaitley-Chandra, said during a press conference on Friday that the sector is “in the midst of a transition process for several years, towards a smaller and more sustainable size.”

She clarified that “some of these adaptations have happened but we are still in the midst of the process,” adding “there is a need for further measures” to revive the struggling sector.

According to official Chinese figures, the Chinese economy recorded a growth rate of 5.2% last year, surpassing the predicted expectations by 5%.

Exportations, typically a major driver of growth, experienced a decline for the first time in seven years due to noticeable tensions with Western countries and a decrease in global demand.

Chinese officials are expected to announce growth targets for the year 2024 in March. (AFP)