IMF cuts China’s economic growth forecast

IMF has cuts its economic growth forecast for China, with weakness in the global economy set to hit exports.

The International Monetary Fund it now expected the world’s second largest economy to grow by “around 7.75%” this year, and at about the same pace in 2014.

That is lower than the 8% forecast for 2013 the IMF made in its World Economic Outlook, published last month.

The IMF also called for a “decisive impetus to reforms” in the country.

Last year, China’s economy grew by 7.8%, its slowest rate for 13 years. In the first three months of this year, it expanded at a lower-than-expected annual pace of 7.7%.

Last week, the release of disappointing Chinese manufacturing figures was one of the factors behind a global sell-off in shares. A survey indicated that factory activity had contracted for the first time in seven months in May.

Speaking to reporters in Beijing, IMF first deputy managing director David Lipton said: “The Chinese economy is expected to grow at around 7.75% this year and at about the same pace next year.

“Chinese export growth has been, after years and years of very rapid growth, very slow because of the state of the global economy and we now are taking our projections of the global economy into effect.”

Among the measures called for by the IMF are slower growth in social financing and a relaxation of controls on interest rates and the exchange rate.

Despite the cut in the IMF’s forecast, David Lipton noted: “Let’s not lose sight of the fact that China is still growing at a very fast rate.

“We’re projecting that growth will remain robust.”

David Lipton added that growth “should pick up moderately in the course of the second half of this year, as the recent credit expansion gains traction and in line with a mild pick-up in the global economy”.