Business & Economy

IMF calls on China to ‘recalibrate’ Covid-19 strategy to support economy

Shanghai, China, Nov 23 (EFE).- The International Monetary Fund said Wednesday that China could support the growth of its economy in the short term with a “recalibration” of its zero tolerance strategy against covid, including a promotion of the vaccination campaign to guarantee protection against the virus.

After completing a virtual round of consultations with Chinese authorities, the agency praised the “impressive recovery” of the country’s economy after the initial impact of the pandemic, but added its growth “has slowed down and remains under pressure.”

It said the main factors are the repeated Covid-19 outbreaks caused by the contagious omicron variant since the beginning of the year, the “profound challenges” in the battered real estate sector and the slowdown in global demand, which could affect the Chinese export sector.

The fund’s Deputy Managing Director Gita Gopinath said that despite the ‘zero Covid-19′ strategy becoming increasingly “more agile,” the virus’ more contagious mutations and “continuous gaps” in the vaccination campaigns – for example, among the elderly – have translated into increasingly frequent confinements, weighing down consumption and private investment.

She also spoke of the real estate crisis in the country after the “well-intentioned” regulation campaign with which Beijing tried to “curb” the high levels of leverage of numerous developers in the country, including some of great relevance as Evergrande.

Government measures “have increased the financial pressure for developers, causing a rapid drop in residential sales and investment, as well as a sharp drop in local government revenue from land sales,” important sources of financing for municipal and regional administrations in the country.

The fund spoke of recent policies to support the sector and called for going further with “strong and well-financed mechanisms” to ensure developments with economic problems are completed and protect those who bought off-plan.

“These measures will help restore buyers’ confidence and facilitate market restructuring,” said Gopinath, who called for bringing the real estate market to a “more reasonable size” in the medium term with reforms such as improving the off-plan sales system or the expansion of alternative forms of saving.

She said that, in 2023, China’s fiscal policy should “protect the recovery and facilitate the restoration of balance.”

“A neutral fiscal policy stance aimed at supporting households will help when carrying out a readjustment towards consumption and boost growth more effectively,” said the economist, who added that monetary policy should remain flexible.

She said China must “reactivate” structural reforms that favor the market in the medium term, such as guaranteeing fair competition between state-owned and private companies.

The IMF’s forecasts for China are for economic growth of 3.2 percent this year and 4.4 percent in the next two, as long as the forecasts that Beijing will put an end to its ‘zero covid’ in a “gradual and safe” way in the second half of 2023. EFE


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