The International Monetary Fund on Friday lowered its 2021 growth forecast for China to 7.9 percent, following a year of “significant human and economic costs” inflicted by the Covid-19 crisis.
The figure is slightly below the 8.2 percent the IMF earlier predicted, although China has been pegged as the only major economy likely to expand in the face of the coronavirus.
After a record contraction in the first three months last year due to unprecedented lockdowns and factory closures, the world’s number-two economy has since bounced back.
But the 1.9 percent full-year growth for 2020 that the IMF maintains, if confirmed, will be its worst showing since 1976, just before the start of its economic reform era.
“The Chinese economy continues its fast recovery from the pandemic, helped by a strong containment effort and swift policy actions to mitigate the impact of the crisis,” said the IMF.
“However, growth is still unbalanced as the recovery has relied heavily on public support while private consumption is lagging,” it added.
With increased spending to support its economic recovery, China’s general government deficit is projected to rise to 18.2 percent of GDP in 2020, up from 12.6 percent the year before.
China’s economy is adjusting to the “pandemic normal”, with help from technology and digitalisation of services, but the IMF cautioned that activity is expected to remain below capacity over the medium term.
The warning comes as certain sectors ranging from hospitality to restaurants remain affected by restrictions.
“Until end-2021, some restrictions and voluntary social distancing will continue to dampen person-to-person services activity,” said the IMF’s report.