International Monetary Fund Managing Director Kristalina Georgieva held a press conference at IMF Headquarters on April 14, 2023.
Kevin Dietch | Getty Images News | Getty Images
The head of the International Monetary Fund warned on Monday that China needs structural reforms to avoid “a fairly significant decline in growth.”
Kristalina Georgieva said in an interview with CNBC at the World Economic Forum in Davos, Switzerland, that China faces both short-term and long-term challenges.
He said that in the short term, China’s real estate sector still needs “repair”, along with high levels of local government debt. In the long term, Georgieva pointed to demographic changes and a “loss of confidence.”
“Ultimately, what China needs is structural reforms to continue opening up its economy and rebalancing its growth model more towards domestic consumption, which in turn creates more confidence in its people. [they] Spend more instead of saving,” Georgieva said.
“All of this will help China cope with what we predict will be a fairly significant decline in growth below 4% without reforms,” he added.
Growth in China’s economy slowed in 2023, hampered by real estate issues and slumping exports. Investors expect economic growth last year to be about 5%.
Separately, the IMF announced in November that it had raised its growth forecast for China to 5.4% in 2023, following policy moves by the Chinese government. But the Washington, D.C.-based agency still predicted growth would slow to 4.6% in 2024 and warned that the real estate struggle would continue.
Georgieva is one of a number of top business figures attending this year’s WEF General Assembly, which runs until Friday. “Rebuilding trust” is the theme of the 2024 WEF summit, with geopolitical tensions, global divisions, inflation and economic growth on the agenda.