BOAO, CHINA – Global economy will experience significant spillover effects with China’s continuous slowdown, said International Monetary Fund (IMF) Managing Director Kristalina Georgieva recently.
Despite that, she added that Beijing has room to change its policies to provide assistance.
IMF had recently revised its projections for China’s growth to 4.4% this year. This is substantially lower than Beijing’s target of approximately 5.5%.
IMF attributed the lower projections to the risk of widespread COVID-19 lockdowns along with supply chain disruptions.
In a recent video address at the yearly Boao Forum for Asia, Georgieva stated that China’s efforts to reverse its economic downturn are critical for global recovery.
“Fortunately, China has policy space to support macroeconomic policies such as focusing on the disadvantaged communities to boost consumption. This can also help China meet its climate goals by diverting economic activity into lower-carbon sectors,” she explained.
She also said that stronger policy measures in the real estate industry may also contribute to a balanced recovery.
Meanwhile, also speaking at the same location, China’s President Xi Jinping remarked that China’s economy is resilient and that its long-term trajectory has not changed.
Due to the increasing headwinds, foreign brokerages have also been reducing China’s GDP projections after March activity data elevated outlook risks due to the prolonged lockdown of mega city Shanghai.
Barclays cut its already-below-consensus projection for the year from 4.5% to 4.3% while BofA revised it to 4.2% from the previous 4.8%.
Nomura also changed its forecast from 4.3% to 3.9% and further expects the Q2 growth to be at a meagre 1.8%, according to their baseline estimates.
During a news conference at the IMF and World Bank spring meetings, Georgieva further added that China’s consumption is falling short and not recovering as rapidly as it should.
She believes that a stimulus would be good the citizens to increase spending.
“Rather than putting money into public assets, put it into people’s pockets to increase the dynamism generated by a consumer boom,” she added.
Recently, China’s commerce ministry announced that it would implement strategic targeted measures to spur consumer recovery. Spending has taken a significant hit as a result of lockdowns that were implemented widely across the country to curb the spread of COVID-19.
The official data records that final consumption accounted for 69.4% of China’s GDP growth in Q1 this year.
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