IMF Upgrades China’s 2024, 2025 GDP Growth Forecasts After ‘Strong’ Q1 

Cleaners prepare to clean the floor at the Galaxy Soho commercial office building in Beijing, Monday, May 27, 2024. (AP)
Cleaners prepare to clean the floor at the Galaxy Soho commercial office building in Beijing, Monday, May 27, 2024. (AP)
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IMF Upgrades China’s 2024, 2025 GDP Growth Forecasts After ‘Strong’ Q1 

Cleaners prepare to clean the floor at the Galaxy Soho commercial office building in Beijing, Monday, May 27, 2024. (AP)
Cleaners prepare to clean the floor at the Galaxy Soho commercial office building in Beijing, Monday, May 27, 2024. (AP)

China's economy is set to grow 5% this year, after a "strong" first quarter, the International Monetary Fund said on Wednesday, upgrading its earlier forecast of 4.6% expansion though it expects slower growth in the years ahead.

The IMF said it had revised up both its 2024 and 2025 GDP targets by 0.4 percentage points but warned that growth in China would slow to 3.3% by 2029 due to an ageing population and slower expansion in productivity.

The global lender now expects the world's second-largest economy to grow 5% in 2024 and to slow to 4.5% in 2025.

"The upgrade that we have for this year mainly reflects the fact that first quarter GDP growth came in stronger than expected, and there were some additional policy measures that were recently announced," IMF's First Deputy Managing Director Gita Gopinath said in Beijing.

China's economy grew at a faster than expected 5.3% pace year-on-year in the first quarter, but deflationary pressures continue to loom large and a protracted property crisis remains a major drag on growth.

"Inflation is expected to rise, but stay low, as output remains below potential. Core inflation is projected to increase only gradually to average around 1% in 2024," Gopinath said at a press conference to mark the release of the fund's annual review of China's economic policies.

A string of recent economic indicators for April including factory output, trade and consumer prices suggest the $18.6 trillion economy has successfully navigated some near-term downside risks, but China observers say the jury is still out on whether the bounce is sustainable.

Retail sales in April, for instance, grew at their slowest pace since December 2022, when Beijing's strict zero-COVID curbs were in place, while new home prices fell at their fastest rate in nine years.

"Risks to the outlook are tilted to the downside, including from a greater or longer-than-expected property sector readjustment," Gopinath said. "The ongoing housing correction, which is necessary for steering the sector to a more sustainable path must continue."



IMF Praises Saudi Arabia’s Unprecedented Economic Transformation

Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
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IMF Praises Saudi Arabia’s Unprecedented Economic Transformation

Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)
Efforts to diversify the economy have started to bear fruit: IMF (Asharq Al-Awsat)

The International Monetary Fund (IMF) has praised Saudi Arabia’s significant economic changes under the “Vision 2030” national transformation plan, noting improvements in public finances and business regulations.
An IMF mission expected non-oil growth in Saudi Arabia to reach around 3.5% in 2024, crediting careful economic policies and major reforms.
The mission also highlighted record-low unemployment rates and controlled inflation in the country, and welcomed recent updates to funding requirements aligned with “Vision 2030” goals.
The IMF released a concluding statement at the end of its official staff visit to Saudi Arabia.
In the statement, the IMF said: “Saudi Arabia’s unprecedented economic transformation is progressing well.”
“Prudent macroeconomic policies, transformative changes—including through fiscal reforms and in the regulatory business environment—and strong domestic demand have helped prop up non-oil growth. Inflation remains contained.”
“Spending reprioritization and recalibration of major spending programs are ongoing. Efforts to diversify the economy have started to bear fruit.”
“Building on these successes, it will be important to sustain the non-oil growth momentum, maintain financial sector stability, continue mitigating risks of overheating, reverse declining total factor productivity and ensure inter-generational equity.”
Economic Activity Remains Robust
According to the IMF, real non-oil growth decelerated from 5.3% in 2022 to a still robust 3.8% in 2023, driven mostly by private consumption and non-oil investment.
While non-oil growth for Q1-2024 indicates some moderation in economic activity— the IMF staff estimated that the output gap remains in positive territory, close to 2% of the non-oil potential GDP.
The statement also noted that the Saudi economy weathered the geopolitical tensions in the Middle East well, thanks to minimal trade and financial exposures to the affected regions and uninterrupted shipments.
Unemployment Rate Reached Historic Lows
In 2023, the Saudi economy added over one million jobs, primarily in the private sector. The overall unemployment rate for Saudis dropped to 7.7% in the last quarter of 2023—inching closer to the 2030 Vision objective of 7%.
Labor force participation rates have remained at historically high levels but relatively flat over the past year for both men and women, albeit with the women’s rate still comfortably exceeding the Vision 2030 goal of 30%.
Headline Inflation Has Decelerated Rapidly
After peaking at 3.4% in January 2023, year-on-year inflation receded to 1.6% in April 2024, helped by an appreciating nominal effective exchange rate.
However, rents are growing at a brisk rate of about 10% amid inflows of expatriate workers and large redevelopment plans in Riyadh and Jeddah.
Wholesale prices have also edged up recently, reflecting an increase in input costs. So far, some uptick has been observed in the wages of high-skilled workers.
Additionally, the current account surplus narrowed significantly.
The decline in the current account surplus from 13.7% of GDP in 2022 to 3.2% of GDP in 2023 mainly reflected lower oil exports and strong growth in investment-related imports.
These were partly mitigated by a record surplus in the services balance, including a 38 percent surge in net tourism income.
The Saudi Central Bank’s (SAMA) holding of net foreign assets reached $423.7 billion in April 2024, which was slightly above the end-2023 level.
Reserves remain ample, representing 15.6 months of imports and 208% of the IMF’s reserve adequacy metric by end-2023.