The International Monetary Fund raised its forecast for world economic growth this year to 3.6%, from 3.4%, citing a long-awaited cyclical recovery in investment, manufacturing, and trade. After gaining speed in the fourth quarter of 2016, the IMF now envisions growth momentum to persist, it said in the spring edition of its twice-yearly World Economic Outlook.
Here’s what the IMF is thinking about China:
GDP: Forecast has been raised to 6.6% versus 6.2% for 2017; 6.2% versus 6.0% for 2018.
Why? Stronger-than-expected momentum in 2016 and the anticipation of continued policy support.
Inflation: Rising to 2.4% in 2017, 3% over the medium term.Why? Why? Reduced slack in the industrial sector and diminishing downward pressure on goods prices.
Report card: Economic reforms continue, with some progress in reducing excess output capacity and rebalancing the demand-side. But so too has the reliance on stimulus measures to maintain growth and the dangerous dependence on rapidly expanding credit, intermediated through an increasingly opaque and complex financial system.
Biggest assurance? The government is expected to keep their emphasis on protecting macroeconomic stability in the run-up to the leadership transition later this year.
Cause for concern? Rapid growth of assets at smaller banks, increasing reliance on wholesale funding, and close interconnections between shadow-banking products and interbank markets.