IMF cuts China’s 2026 growth forecast to 4.5%

The International Monetary Fund on Tuesday lowered its forecast for China's economic growth this year to 4.5%, down from 4.6% in July. That puts the projection at the bottom of Beijing's official target range of 4.5% to 5%. The fund also trimmed its 2027 forecast by one-tenth of a percentage point, to 4.0%.scmp+2

The cut came in the IMF's October World Economic Outlook, released as finance leaders met in Bangkok for the annual meetings of the IMF and World Bank. The report found that China's strong exports are no longer making up for weak demand at home.nbcchicago+1

Exports can't make up for weak demand at home

"Sluggishness in domestic consumption and weakening investment amid continued property sector strains were only partly offset by robust export performance," the report said, according to the South China Morning Post. It added that "higher global oil prices, together with protracted uncertainty and structural headwinds, are expected to weigh on activity," while "policy support is expected to prevent a sharper slowdown."newindianexpress+1

According to AFP, a years-long crisis in China's real estate sector has made consumers wary. Spending has stayed weak even as exports and high-tech industries such as artificial intelligence and electric vehicles boom. China's economy grew 4.3% in the second quarter, the slowest pace since the fourth quarter of 2022, after 5.0% growth in the first quarter. The IMF said China's trade surplus, a record \$1.2 trillion last year, could grow further in 2026.sedaily+1

China's foreign ministry responded that the country's economic fundamentals remain strong and said it was confident about future growth, according to IANS.ianslive

Oil shock and AI shape the global picture

The China downgrade contrasts with a small upgrade to the global outlook. The IMF now expects the world economy to grow 3.1% this year, up from 3.0% in July, and 3.4% in 2027, the Associated Press reported. Investment in artificial intelligence is offsetting much of the energy shock from the war in the Middle East. The fund's forecasts assume oil averages \$96 a barrel this year and that shipping through the Strait of Hormuz resumes by March.nbcchicago

Gains from AI are going mostly to a few economies. The IMF raised its forecast for South Korea to 3.3% and for Taiwan to 10.7%, both lifted by demand for AI chips. India is projected to grow 7.0%, an upgrade of 0.6 percentage points. The report said just 32 countries now account for 95% of global growth, down from 54 in April.newindianexpress+1

"The outlook is highly uneven," Silvana Tenreyro, the IMF's director of research, told reporters in Bangkok. In an adverse scenario where oil reaches \$130 a barrel, the fund warned that growth would weaken further and 2027 inflation would rise to 5.2%.investinglive+1