Chinese economic growth expected to slow further in 2024–2026
The newest forecast from the Bank of Finland’s Institute for Emerging Economies (BOFIT) sees China’s economic growth on a slowing trend. Real GDP growth this year is expected to remain around 4 percent. Cyclical and structural factors should diminish growth to around 3½ percent next year and 3 percent in 2026. Uncertainty over China’s official reported figures has risen.
“Structural and cyclical factors continued to drag down Chinese growth this year,” notes BOFIT senior economist Juuso Kaaresvirta. “Even though officials are introducing support measures to strengthen the economy and correct economic distortions, these actions by themselves do not seem to be enough to halt the slowdown in economic growth.”
China’s era of high growth fading
Chinese economic growth has slowed this year. According to government figures, on-year GDP growth was 5.3 percent in the first quarter, 4.7 percent in the second quarter and 4.6 percent in the third quarter. BOFIT’s alternative calculation of Chinese GDP further suggests real growth might have been even considerably lower. We expect GDP growth the be around 4 percent this year. With the effects from recently launched stimulus measures kicking in next year, GDP growth should still remain at around 3½ percent next year, and then slow to around 3 percent in 2026, which is a level of growth in line with China’s long-term potential growth rate.
The moderation of economic growth is due above all to structural factors such as the shrinking pool of working-age people, China’s slow transition away from an investment-driven growth model to a modern consumption-driven model, inefficient use of resources, an opaque policy environment and weak total output gains. Branch-specific differences are likely to persist during the forecast period, with certain branches experiencing high growth and others contracting. In any case, 3-percent economic growth is a respectable figure for the world’s largest upper-middle-income nation, and on par with global growth.
China’s economic outlook could brighten if the country moves ahead quickly with economic reforms. Although aggressive fiscal stimulus would boost short-term growth, it would also increase pressure to deal with general government imbalances over the medium term. Economic growth could be impeded if actual state of the financial sector is weaker than assumed in our forecast.
The forecast document is available at https://www.bofit.fi/en/forecasting/latest-forecast-for-china
BOFIT will hold a China briefing (in Finnish) on the forecast on November 4, 2024, starting at 13.00 EEST. A video upload of the event will be posted on the Bank of Finland’s YouTube channel.
For further information:
Juuso Kaaresvirta, Senior Economist, p. +358 9 183 2107, juuso.kaaresvirta@bof.fi
Iikka Korhonen, Head of Research, p. +358 9 183 2272, iikka.korhonen@bof.fi
Keywords
Links
Bank of Finland
The Bank of Finland is the national monetary authority and central bank of Finland. At the same time, it is also a part of the Eurosystem, which is responsible for monetary policy and other central bank tasks in the euro area and administers use of the world’s second largest currency – the euro.
Subscribe to releases from Suomen Pankki
Subscribe to all the latest releases from Suomen Pankki by registering your e-mail address below. You can unsubscribe at any time.
Latest releases from Suomen Pankki
The IMF’s concluding statement on the Finnish economy8.11.2024 14:00:00 EET | Press release
The International Monetary Fund (IMF) published its concluding statement on the Finnish economy on Friday 8 November.
IMF:s kommentarer om Finlands ekonomi8.11.2024 14:00:00 EET | Pressmeddelande
Internationella valutafonden (IMF) offentliggjorde sina kommentarer om Finlands ekonomi fredagen den 8 november.
IMF:n lausunto Suomen taloudesta8.11.2024 14:00:00 EET | Tiedote
Kansainvälinen valuuttarahasto (IMF) julkisti lausuntonsa Suomen taloudesta perjantaina 8. marraskuuta.
Application period now closed for position of Governor of the Bank of Finland8.11.2024 12:30:00 EET | Press release
The application period for the position of Governor of the Bank of Finland closed at 12:00 noon on Friday 8 November 2024. A total of 8 applications for the position had been received by the deadline.
Ansökningstiden för tjänsten som chefdirektör för Finlands Bank har gått ut8.11.2024 12:30:00 EET | Pressmeddelande
Ansökningstiden för tjänsten som chefdirektör för Finlands Bank gick ut kl. 12.00 fredagen den 8 november 2024. Till tjänsten inkom 8 ansökningar före utsatt tid.
In our pressroom you can read all our latest releases, find our press contacts, images, documents and other relevant information about us.
Visit our pressroom