Prolonged slowdown in China raises risks to global economy, IMF chief says

© . FILE PHOTO: IMF Director Kristalina Georgieva speaks at a Vatican conference on economic solidarity, in the Vatican Feb. 5, 2020. REUTERS/Remo Casilli BOAO, China () -A prolonged slowdown in China would have significant global spillovers, said IMF director Kristalina Georgieva Thursday, but added that Beijing has room to adjust policy to provide support. The International Monetary Fund cut its growth forecast for China this year to 4.4% on Tuesday, well below Beijing’s target of around 5.5%, amid risks from widespread COVID-19 lockdowns and supply chain disruptions. In a video address to the annual Boao Forum for Asia, Georgieva said China’s measures to counter the economic slowdown are vital to the global recovery. “Fortunately, China has policy room to provide macroeconomic policy support, including shifting the focus to vulnerable households to bolster consumption, which can also help support China’s climate goals by directing economic activity towards lower-carbon sectors,” he added. Georgia. “Stronger policy efforts in the real estate sector could also contribute to a balanced recovery.” At the same venue, Chinese President Xi Jinping said the Chinese economy is resilient and the long-term trend has not changed. In the face of mounting headwinds, foreign brokers have also lowered GDP forecasts for China, after weakness in March activity data boosted the outlook as lockdown continues in the megacity of Shanghai. Barclays (LON:) Tuesday cut their already below consensus forecast from 4.5% earlier to 4.3%, while BofA lowered their forecast for this year to 4.2% from 4.8% earlier. Nomura on Thursday revised its forecast to 3.9% this year from 4.3% earlier, and second-quarter growth is expected to grow a meager 1.8%, according to their baseline estimates. INCREASING CONSUMPTION “What we’re seeing in China is consumption is falling short and not recovering as much as needed,” Georgieva told a news conference Wednesday at the IMF and World Bank spring meetings. “So instead of putting money into public investment, put it in people’s pockets so that more dynamism comes from a consumption boom.” China’s Commerce Ministry said on Thursday it would take targeted measures to stimulate a recovery in consumption. Spending has been hit hard by lockdowns across the country that began last month to contain the spread of COVID-19. Final consumption accounted for 69.4% of Chinese GDP growth in the first quarter, according to official data.

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