(Bloomberg) — China’s real-estate woes require a “forceful” response by officials there to restore confidence, the International Monetary Fund said.
(Bloomberg) — China’s real-estate woes require a “forceful” response by officials there to restore confidence, the International Monetary Fund said.
Speaking at a press conference after unveiling lower economic growth forecasts for the country as part of the Washington-based lender’s World Economic Outlook, Chief Economist Pierre-Olivier Gourinchas highlighted the need for robust policy.
“Clearly what this is calling for is forceful action by the authorities,” Gourinchas told reporters in Marrakech, Morocco on Tuesday.
Beijing officials should “help restructure struggling property developers, to make sure that there isn’t any increase in financial instability, to make sure it remains localized in the real estate market and doesn’t spread out into the broader financial system, and help restore confidence of households,” he said.
Gourinchas spoke as news emerged that China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help meet the official growth target.
The Chinese government has stepped up aid for the economy in recent months with piecemeal actions. It has lowered key interest rates, freed up more long-term cash into the banking system, added support for housing sales and household consumption, and accelerated the issuance of special local government bonds since August.
Even so, the outlook has shown little sign of improvement.
The IMF cut its growth forecast for China for this year to 5% from 5.2%, and for next year to 4.2% from 4.5%, saying that the economy is losing momentum because of declines in real estate investment and housing prices that endanger government revenues from land sales, as well as weak consumer sentiment.
Read more: China Mulls New Stimulus, Higher Deficit to Meet Growth Goal
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