Emerging Asian economies’ strong growth to subside amid China slowdown – IMF

SINGAPORE (ICIS)–Emerging Asian economies are expected to see strong economic growth subside, partly due to a sustained slowdown in China, the International Monetary Fund (IMF) said on Tuesday.

• China’s 2024 growth forecast lowered to 4.8%
• Downside risks dominate global outlook
• China property risks may trigger global impact

The IMF trimmed its forecast for emerging and developing Asian economies by 0.1 percentage points to 5.3% and 5.0% for this year and 2025, respectively, slowing from the 5.7% expansion in 2023.

In India, the outlook on a fiscal year basis is for GDP growth to moderate from 8.2% in 2023 to 7% in 2024 and 6.5% in 2025, “because pent-up demand accumulated during the pandemic has been exhausted, as the economy reconnects with its potential”, the IMF said.

For China, the IMF downgraded its projection for this year by two-tenths of a percentage to 4.8% from its 5% estimate in July. This is lower than China’s official growth target of around 5% for this year.

The IMF’s China growth forecast for 2025 was unchanged at 4.5%.

However, the slowdown in China is projected to be more gradual despite persisting weakness in the real estate sector and low consumer confidence, it said, largely thanks to better-than-expected net exports.

The IMF’s chief economist Pierre-Olivier Gourinchas at a press conference on Tuesday said in its latest forecasts that China’s fiscal stimulus measures so far lacked detail and therefore were not included in the China growth outlook.

China’s central bank stimulus measures, unveiled last month to spur lending, “would do little to materially lift growth”, Gourinchas was quoted by news agency Reuters as saying.

China’s economic forecast remains bleak, despite the government’s stimulus measures announced in late September, which briefly boosted market sentiment.

China on 18 October reported year-on-year GDP growth of 4.6% in the second quarter, the slowest pace since early 2023, while overall growth in the first nine months of 2024 stood at 4.8%.

China’s latest measures are insufficient to address its economic woes, economists have warned, and the IMF notes that significant risks remain, particularly in the troubled property sector.

“Conditions for the real estate market could worsen, with further price corrections taking place amid a contraction in sales and investment,” the IMF said.

“The experiences of Japan in the 1990s and the United States in 2008 suggest that a further price correction is a plausible downside risk if the crisis is not adequately addressed.”

GLOBAL REPERCUSSIONS OF CHINA’S SLOWDOWN
A prolonged or severe downturn in China’s property market, especially one that triggers financial instability, could dampen consumer confidence and negatively impact the global economy due to China’s significant role in international trade, the IMF warned.

With China’s economy softening, global growth is expected to be a lackluster 3.1% in five years – a notch down from the pre-pandemic average, it said.

Growth is projected to hold steady at 3.2% in 2024 and 2025, but some low-income and developing economies have seen sizable downside growth revisions, often tied to intensifying conflicts.

The IMF’s Gourinchas in a separate blog post said that downside risks are increasing and now dominate the global economic outlook.

“An escalation in regional conflicts, especially in the Middle East, could pose serious risks for commodity markets,” he said.

Global output could be significantly lower than the IMF’s baseline forecast due to shifts toward undesirable trade and industrial policies, overly tight monetary policy, or an abrupt tightening of global financial conditions, Gourinchas added.

Focus article by Nurluqman Suratman