BOFIT Forecast for China 2024–2026

Abstract

The Chinese economy is slowing. Growth in domestic demand has weakened, the downturn in the real estate sector has entered its fourth year and local governments continue to struggle with fiscal problems that restrict government stimulus measures. Thus, even with the stimulus announced in late September, we expect China’s real GDP growth to come in at around 4 percent this year. With cyclical and structural factors constraining growth, real GDP growth should be around 3½ percent next year and close to 3 percent in 2026. Uncertainty surrounding the official economic figures reported by China has increased. China’s growth could exceed our forecast if the government moves quickly on needed economic reforms. In a short-term, a robust fiscal stimulus could fuel growth but given the already very large general government deficit, the stimulus would in medium term increase the pressure to balance general government finances and thus re-straining growth for years to come. The financial sector’s actual condition could also be considerably weaker than reported, darkening the economic outlook.