The International Monetary Fund has called on China to increase fiscal stimulus as the country's economy is close to deflation and domestic demand remains weak. The call was made by Krishna Srinivasan, director of the IMF's Asia and Pacific Department.
“Fiscal support is limited in size and scope“, Srinivasan said at a press conference. He said much larger measures are needed in the short term until the Chinese economy restores price dynamics.
Growth is slowing
In its latest report “World Economic Outlook“ The IMF forecasts China's growth to slow to 4.5% in 2026 from 5% in 2025. The pace is expected to fall further to 4% in 2027, mainly due to weak domestic consumption and investment activity.
According to Srinivasan, much of the growth is currently explained by external demand. Attempts to shift to a more balanced model based more on domestic consumption have not yet yielded the expected results.
“Much more is needed in terms of fiscal stimulus in the near term“, said Krishna Srinivasan.Property crisis remains a major problem
The IMF identified the ongoing crisis in China's real estate market as another key risk to the economy. The fund said the sector's problems have dragged on for too long and continue to weigh on household confidence.
Among the recommended measures are policies to restore the property sector, increase household confidence and build stronger social safety nets. The aim is to limit consumer caution and support domestic demand.
The IMF's call puts the need for Chinese authorities to strengthen support for the economy, while accelerating the transition from an export-dependent model to a greater role for domestic consumption. The fund did not specify a specific size or timeframe for a new stimulus package.
Sources: reuters.com