IMF urges China to deploy bigger fiscal stimulus
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The IMF’s director of the Asia and Pacific department Krishna Srinivasan said the fiscal support China has provided is welcome but limited.
PHOTO: REUTERS
- The IMF says China needs much bigger fiscal stimulus because weak domestic demand is leaving the economy “teetering on deflation.”
- Krishna Srinivasan said current support is “quite limited in size and scope,” and the IMF expects growth to slow from 5.0% in 2025 to 4.5% in 2026, then 4.0% in 2027.
- The IMF says China’s growth still depends on external demand, while the long-running property crisis needs action to restore confidence and strengthen social safety nets.
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BANGKOK – China must deliver bigger fiscal stimulus as its economy teeters on deflation, a senior International Monetary Fund (IMF) official said on Oct 15.
“We welcome the fiscal support China has provided to the economy. But in our view, it is quite limited in size and scope,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, told a press conference.
In its World Economic Outlook, the IMF projected China’s economic growth to slow to 4.5% in 2026 from 5% in 2025 due to weak domestic demand. It expects growth to slow further to 4% in 2027.
“Most of the growth in China is explained by external demand, and so the rebalancing, which we’ve been talking about for some time, has not really materialised,” Srinivasan said. “We think that a lot more is needed in terms of fiscal stimulus in the near term until the economy reflates,” he added, calling for the need to push up prices in an economy “teetering on deflation”.
He also said China’s property crisis has “lingered for too long”, reiterating IMF’s proposal for policies to rehabilitate the real estate sector, like steps to boost household confidence and build social safety nets. REUTERS