IMF report credits full border reopening for strong rebound, positive economic spillover
Krishna Srinivasan (center), Director of the Asia and Pacific Department of the International Monetary Fund, and Deputy Director Thomas Helbling (right) hold a media briefing in the Hong Kong Special Administrative Region on the IMF's growth forecast this year for China and the Asia-Pacific on May 2, 2023. (CALVIN NG / CHINA DAILY)
China's full border reopening has boosted its economic growth prospects and provided a stronger momentum for near-term growth in the Asia-Pacific region, experts at the International Monetary Fund said.
In its "Regional Economic Outlook: Asia and Pacific" report released on Tuesday, the IMF stated that the Asia-Pacific region is projected to contribute 67.4 percent of the global economic growth in 2023. Out of this 67.4 percent, China is anticipated to contribute a share of 34.9 percent, followed by India with 15.4 percent.
The IMF also predicted that the Chinese economy will expand 5.2 percent this year, up 0.8 percentage point from its previous forecast of 4.4 percent made in October. In 2024, the economy will grow 4.5 percent, unchanged from the prediction it made in October.
China's reopening has led to a strong rebound in consumption in the first quarter of 2023, and the recovery is expected to continue and be led by the services industry, according to the IMF.
During a news conference held in Hong Kong to release the report, Krishna Srinivasan, director of the IMF's Asia and Pacific Department, said the economic growth is projected to be led by consumption this year. "That will be important when ensuring strong and sustainable growth in China," he said.
"With the full reopening of the border and the easing of mobility restrictions, there will be a strong rebound in consumption of household-related activities that we still see," said Thomas Helbling, deputy director of the department.
The IMF highlighted that China's recovery will have a positive growth spillover on the Asian economy, with the region's tourism-dependent neighbors that are heavily reliant on goods exports to the country being the main beneficiaries.
China's GDP rebounded 4.5 percent year-on-year in the first quarter of 2023, according to the National Bureau of Statistics. Given the strong recovery momentum and low comparison base of the previous year, the country is expected to register a 5 percent growth this year.
The IMF said that China needs to undertake long-term structural economic reforms in order to maintain long-term economic competitiveness. It also mentioned that the country has to tackle the issue of weakened productivity growth and an aging population.
"China is working hard to support growth, innovation and new technologies, and taking measures to strengthen productivity and …slow down the impact of the aging population on the labor force, such as raising retirement age," Helbling said.
China needs to address the short-term challenges of the property sector. The central government has stepped up measures, focusing on the need to boost the flow of finance for developers, which has benefited large developers and stabilized the market, according to Helbling.
The IMF has predicted that the Asian economy will expand 4.6 percent this year and grow 4.4 percent in 2024. Last year, the region's economy posted 3.8 percent growth.
"Asia and Pacific will be the most dynamic of the world's major regions in 2023, predominantly driven by the buoyant outlook for China and India," the IMF said in its regional report.