Chinese economic slowdown will dampen Asian growth: IMF

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Beijing (AFP) – China’s “sharp and unusual” economic slowdown is expected to dampen growth across Asia until the end of next year, the International Monetary Fund (IMF) warned on Friday, darkening an already bleak global outlook.

The global economic outlook has darkened this year as countries grapple with higher living costs, tighter financial conditions and heightened uncertainty following Ukraine’s invasion of Ukraine. Russia.

Crises have blunted the rebound from the Covid-19 pandemic, although Asia remained a “relative bright spot” compared to other parts of the globe, the IMF said in its Regional Economic Outlook.

But growth in the region is facing headwinds from a Chinese economy weighed down by an intransigent zero-Covid policy and a crisis in the real estate sector, the organization said.

Earlier this month, the IMF said it had cut its growth forecast for China to 3.2% in 2022, which would be the smallest expansion for the world‘s second-largest economy in about four decades, at the latest. exclusion of the first year of the pandemic.

The new report lowers the growth forecast for Asia to 4% this year, down 0.9 percentage points from the previous outlook in April.

The organization said it expects China’s growth to reach 4.4% and Asia’s to 4.3% next year, still “well below” the global average. 5.5% over the past two decades.

According to the IMF, China’s “widespread” slowdown “would have significant spillovers to the rest of Asia through trade and financial linkages.”

He noted that the region could also face other “persistent” headwinds in the form of tighter global monetary policy and Moscow’s invasion of Ukraine, which has caused commodity prices to soar. raw materials.

Few infections, little growth

“Asia’s strong economic rebound earlier this year is running out of steam, with a weaker-than-expected second quarter,” said Krishna Srinivasan, director of the IMF’s Asia and Pacific department.

About 208 million Chinese are under some form of heightened Covid-19 restrictions, Japanese bank Nomura has estimated. Hector RETAMALAFP

Much of the growth shortfall “can be explained by lower levels of investment as a result of the pandemic”, he said, adding that many countries should act to mitigate excessive corporate indebtedness. and losses of human capital.

He warned that economic fragmentation, driven by geopolitical tensions and trade policy uncertainty, “presents a significant risk to the region” and could “have adverse macroeconomic consequences in the short term”.

China is the last major economy married to a zero Covid policy, imposing instant lockdowns, mandatory testing and lengthy quarantines in a bid to quell any outbreaks as they arise.

About 208 million people in the country are under some form of tightened virus restrictions, Japanese bank Nomura estimated in a note on Monday.

Further problems plagued the massive property sector as a series of debt-ridden developers defaulted on loans while others struggled to raise funds.

Official data on Monday showed China’s economy grew 3.9% year-on-year in the third quarter, a stronger-than-expected performance that came after Beijing announced a delay in releasing figures during the third quarter. a Communist Party congress earlier this month.

Analysts still expect the country to fall well below its stated annual growth target of around 5.5%.

Investors fled Chinese stocks earlier this week after President Xi Jinping shattered a long-standing precedent to seal a third term in office, stoking fears that virus lockdowns and other measures would hurt the economy do not continue.

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