IMF Upgrades China's GDP Forecasts on Surprise Performance, Policy Support
Zhou Ailin
IMF Upgrades China's GDP Forecasts on Surprise Performance, Policy Support

(Yicai Global) April 19 -- The International Monetary Fund raised its forecasts for China's economic growth this year and next, reflecting stronger-than-expected momentum in the world's second-largest economy in 2016 and expectations of continued policy support.

Gross domestic product may increase 6.6 percent this year, 0.1 percentage point higher than the IMF's January forecast, the Washington-based organization said in its latest World Economic Outlook released yesterday. Growth next year is now projected at 6.2 percent, up 0.2 point.

But the IMF warned that the uptick is driven by short-term factors, suggesting that China should still pay close attention to credit expansion and continue to push reforms. From a global perspective, potential growth slackened as a result of population aging and delays in structural reforms. An upsurge in trade protectionism poses a threat, and advances in technology create a considerable impact on the labor market, the report said.

The IMF also raised its global growth forecast 0.1 point to 3.5 percent, with its 3.6 percent projection for next year unchanged. Economic growth in the US is estimated at 2.3 percent and 2.5 percent this year and next, the same as the IMF's Janaury forecasts.

Between 2011 and 2013, the IMF slashed growth estimates in the face of a slowdown in the Chinese and Indian economies and a bear run on commodity markets. The yuan entered another downward cycle in 2015, and panic spread through global financial markets.

The situation started to improve in the second half of last year. Through effective efforts to reduce overcapacity, China's producer price index swung into the black in the fourth quarter and continued to pick up after a 54-month losing streak. Last month, the PPI jumped 7.6 percent year-on-year. Coupled with improvements in corporate profitability and progresses in institutional reforms, it led to a sustained recovery in private investment. The latest government figures show that GDP growth rebounded to 6.9 percent in the first quarter, beating expectations.

As far as the macroeconomy is concerned, China will continue to give top priority to growth stability, the IMF said. Significant progress has been achieved in terms of reducing excess capacity and rebalancing on demand, but China still needs to pay particular attention to policies intended to stimulate economic growth, excessive reliance on credit expansion and the increasing complexity of its financial system, the IMF's report added.

While acknowledging the economic recovery, the IMF warned governments against a rise in global protectionism.

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Keywords: IMF , China , GDP