The IMF is open to revising its growth forecast upwards, after the first quarter data has exceeded its expectations.
China's gross domestic product (GDP) recorded an expansion of 1.6% in the first three months of 2024, representing a significant acceleration compared to the 1% expansion in the last quarter of last year, despite the difficulties that the real estate sector is going through, according to data published this Tuesday by the National Statistics Office.
"The national economy continued the good momentum of recovery, with a good start in the first quarter," said the National Statistics Office.
Compared to the first quarter of last year, the world's second largest economy experienced growth of 5.3%, one tenth above the year-on-year expansion of 5.2% in the last three months of 2023.
The year-on-year expansion of the Chinese economy between January and March 2024 reflects the 3.3% growth of the primary sector, including a 3.8% expansion of agriculture, while the secondary sector increased by 6%, with an expansion 6.1% of the industry; and services, which account for 59% of the Chinese economy, grew by 5%.
China closed 2023 with GDP growth of 5.2% for the year as a whole, after expanding 3% in 2022, when the world's second largest economy was slowed by the measures implemented to contain Covid-19.
Looking ahead to 2024, the Chinese Government expects to achieve GDP expansion "of around 5%", thus maintaining a growth target similar to that set for last year.
Despite the good growth data for the first quarter, Louise Loo, chief China economist at Oxford Economics, warns that the readings for the first three months and March also showed very clearly the difficulties that will continue to affect the Chinese economy this year. , including the uncertainty of external demand and disinflationary pressures.
Thus, while real GDP accelerated sequentially in the first quarter, supported by the excellent performance of the manufacturing sector and household spending, activity data for March "suggests that momentum is fading" and , given that the inventory buildup is likely to be considerable, the normalization of post-holiday retail sales, the weakness and unpredictability of external demand and a still cautious stimulus, leads to expectations that growth "will slow in the second quarter."
Along similar lines, Zichun Huang, economist at Capital Economics, warns that monthly activity data suggests that the recovery "remains fragile", which anticipates a new slowdown in a context marked by structural obstacles, particularly in the sector. real estate, where the correction "has barely begun" and a strong downward adjustment is expected in the coming years, which will affect economic growth in the medium term.
THE IMF WILL REVIEW ITS PROJECTIONS
After learning of this stronger-than-expected evolution of activity in China in the first three months of 2024, the chief economist of the International Monetary Fund (IMF), Pierre-Olivier Gourinchas, has left the door open to an upward revision of the forecasts of the international institution for the Asian giant.
The official has acknowledged that China's growth data in the first quarter has been "higher than estimates, and certainly also higher than the Fund's estimates", which is why the French economist has acknowledged that the institution will evaluate its projections of growth "and it is possible that they will be revised upwards.
In this sense, the IMF contemplates an expansion of China's GDP of 4.6% in 2024 and 4.1% in 2025, according to the 'World Economic Outlook' report, published this Tuesday by the Washington-based institution.
However, Gourinchas has warned of the weakness of the real estate sector in China "which is still there" and that the published indicators suggest that "this weakness will persist", which is why he considers reforms necessary to try to address the fundamental causes of the sector's weakness. real estate, including addressing the problems faced by some real estate developers and "recapitalizing or liquidating" them.
Likewise, he has warned of the need to find ways to sustain China's domestic consumption in the medium and long term, since the country still has relatively weak domestic consumption and the economy maintains its dependence on the export sector. "And that is something that in the context of trade tensions could be complicated," added the IMF chief economist.
