IMF, International Investment Banks Cut China’s GDP Forecasts in July

The seal for the International Monetary Fund is seen near the World Bank headquarters (R) in Washington on Jan. 10, 2022. (Stefani Reynolds/AFP via Getty Images)

The International Monetary Fund (IMF) and global investment banks have slashed their forecasts again for China’s GDP growth as its “economy shows signs of losing steam.”

On July 24, JPMorgan Chase lowered its China GDP forecast to 5 percent, down from 5.5 percent previously, which is the sixth adjustment that the firm has made this year. Citigroup and Morgan Stanley lowered their forecasts to 5 percent this month.

The average forecast for China’s GDP by the six major international investment firms is reportedly 5.1 percent. So far this year, Citi’s latest forecast marks the firm’s fourth adjustment; Morgan Stanley adjusted its forecast just once since January; Goldman Sachs revised its forecast twice; Japan’s Nomura Securities changed its forecast four times; UBS, a Switzerland-based multinational investment bank, revised its forecast three times.

China’s Economy ‘Losing Steam’: IMF

The IMF raised its forecast for China’s GDP growth to 5.2 percent in April from 4.4 percent previously. However, on July 25, it predicted that China’s GDP growth would fall from 5.2 percent in 2023 to 4.5 percent in 2024 in its latest report.

“In China, the recovery following the reopening of its economy shows signs of losing steam, while there are continued concerns about the property sector,” said IMF Chief Economist Pierre-Olivier Gourincha.

The weak real estate sector has dragged down investment in China, while sluggish global growth means lower demand for Chinese goods, further weakening the outlook. Youth unemployment is rising—reaching 20.8 percent in May—indicating a weak labor market, according to the IMF.

“High-frequency data through June confirm a softening in momentum into the second quarter of 2023,” the IMF report added.

After Beijing lifted its draconian “zero-COVID” policy in December, the economy experienced a temporary rebound. This led the international investment banks to raise their forecasts for China’s GDP at the beginning of this year.

However, China’s economy didn’t achieve the expected post-COVID recovery but has shown signs of weakness, particularly in the real estate sector, and the ruling Chinese Communist Party (CCP) didn’t take any major stimulus measures. Thus, investment banks have kept lowering their forecasts for China’s GDP growth.

People wait for buses at a bus stop near a construction site at the central business district in Beijing on March 26, 2023. (Jade Gao/AFP via Getty Images)

2nd Quarter GDP Growth Slows to 0.8 Percent

The CCP admitted on July 17 that China’s GDP growth rate in the second quarter was lower than expected.

According to official data from the National Bureau of Statistics, China’s GDP grew just 0.8 percent in April-June, reporting slowing momentum in the world’s second-largest economy.

Current affairs commentator Wang He told The Epoch Times that the official economic data for the second quarter shows that all three economic engines that drive China’s economic growth are slowing down: weak domestic demand, sluggish investment, and declining imports and exports.

Although CCP leader Xi Jinping and Premier Li Qiang have continued encouraging private enterprises to invest more in the Chinese economy, the regime’s clamping down on real estate developers and fintech companies through strict regulatory measures discourages many private firms from doing so.

According to the CCP’s official data, in the first half of the year, national real estate development investment was 5.855 billion yuan (about $818.9 million), a year-on-year decrease of 7.9 percent; and the development and construction sector and sales volumes of commercial housing decreased by 6.6 percent and 5.3 percent, respectively.