Daily Management Review

IMF Raises Growth Prediction For Emerging Asia, Alerts Investors To China's Real Estate Dangers, But Notes India Is A Shining Example


IMF Raises Growth Prediction For Emerging Asia, Alerts Investors To China's Real Estate Dangers, But Notes India Is A Shining Example
The International Monetary Fund updated its 2024 growth prediction for the economies of developing Asia, citing dangers from China's worsening property sector crisis while maintaining its bullish outlook for India.
It has upgraded its October prediction by 0.4 percentage points to 5.2% growth for emerging economies in Asia. The growth rate for this year is still anticipated to be lower than the projected 5.4% growth rate for 2023.
The IMF revised its October forecast to 4.6% GDP growth in China for 2024, an increase of 0.4 percentage points. It cited China's past year's faster-than-expected growth and increased government spending on disaster relief.
It cautioned that "deepening property sector woes in China or, elsewhere, a disruptive turn to tax hikes and spending cuts could also cause growth disappointments," despite upgrading China's overall growth projection.
The IMF stressed that in order to address China's property problems, comprehensive restructuring policy measures must be put in place. It issued a warning that real estate investments would decline more sharply and for a longer period of time, which would harm both home growth and the growth of trading partners.
The IMF stated, "Reduced household consumption in a context of subdued confidence is also possible, as is unintentional fiscal tightening in response to local government financing constraints."
However, the IMF stated that if the government pursues property sector reforms or more fiscal support than anticipated to bolster flagging consumer confidence and demand, China may show a stronger rebound.
There are no indications that the real estate industry crisis will soon end. A Hong Kong court earlier this week ordered debt-ridden developer China Evergrande to liquidate. That was only a few days after the finance ministry and central bank of China announced plans to increase the liquidity available to real estate developers.
The IMF predicts that India's growth will be robust at 6.5% in 2024 and 2025 due to strong domestic demand. The October prediction was upgraded by 0.2 percentage points in the latest estimates for both years.
Due to the unexpected strength of the US economy and China's fiscal support measures, the IMF has raised its prediction for global growth. It raised its October forecast by 0.2 percentage points to 3.1% global growth this year, and it forecasts 3.2% growth in 2025.
The head economist at the IMF, Pierre-Olivier Gourinchas, told CNBC's Karen Tso late on Tuesday that "what we've seen is a very resilient global economy in the second half of last year, and that's going to carry over into 2024."
The IMF projects 4.4% and 5.8% worldwide inflation in 2025 and 2024, respectively. Inflation in industrialised economies is predicted to drop to 2.6% this year, whereas in emerging economies, it is expected to drop by only 0.3 percentage points to 8.1% in 2024.