IMF could lift its GDP forecast for China again in 2017
China’s economy grew faster than expected in the first three months of 2017, after record credit growth, a massive property boom and higher infrastructure spend
Washington — China’s economy may grow faster than the International Monetary Fund (IMF) had expected for all of 2017 after a first-quarter performance that beat forecasts, the fund said, as it urged Beijing to address entrenched financial risks in the country.
Data in April showed that China’s economy grew at a faster-than-expected rate of 6.9% in the first three months of 2017, after record credit growth, a gravity-defying property boom and higher government infrastructure spending juiced activity.
The data prompted the IMF this week to raise its 2017 and 2018 growth forecasts for the Chinese economy, and Changyong Rhee, director of the Asia and Pacific Department at the fund, said on Friday that there was a chance it may lift its 2017 estimate again.
The IMF, which was holding a meeting from Friday to Sunday for central bankers and finance ministers, lifted its 2017 growth projection for the Chinese economy, the world’s second largest, to 6.6% from 6.5% on Tuesday.
"There is upside risk to our current projection," Rhee told reporters at a briefing.
But at the same time, the fund said it expected certain parts of China’s economy, including its real-estate market and its shadow banking sector, to cool in the second half of the year.
The fund said it had always advised China that the country’s financial trends were "dangerous and unsustainable".
These include an "excessive" role of the state, large resource miscalculation in many areas, state-owned companies that lack budget constraints and financial discipline, said Markus Rodlauer, deputy director of the Asia and Pacific department at the IMF.
"When this would unravel in some way or another, nobody can predict," Rodlauer said, adding that the fund was hopeful China could untangle its problems.
China’s debt-to-GDP ratio rose to 277% at the end of 2016 from 254% the previous year, with an increasing share of new credit being used to pay debt servicing costs, according to an estimate from UBS.