Will the real estate slowdown in China intensify?
Will the real estate slowdown in China intensify? The following is the answer given by the International Monetary Fund (IMF), in its World Economic Outlook, released this Wednesday.
A broader slowdown in China will affect the global outlook, mainly through spillover effects to commodity exporters and emerging markets.
The benchmark assumes a significant moderation in real estate investment growth in 2022, reflecting continued stringent policies to control risks related to leveraged property developers.
If the housing slowdown intensifies further and balance sheet strains spread beyond property developers, exposed banks and other financial intermediaries may be forced to cut lending to the broader economy.
Real estate
Such an outcome would curb investment and consumption, dragging overall growth down with adverse implications for commodity exporters and other emerging markets.
In China, the disruption in the housing sector has heralded a broader slowdown.
With a strict zero Covid-19 strategy leading to recurring mobility restrictions and deteriorating prospects for employment in the construction sector, private consumption is likely to be lower than anticipated.
Combined with lower real estate investment, this means the 2022 growth forecast is revised down from October by 0.8 percentage point to 4.8 percent, with negative implications for the outlook for trading partners. .
Other countries
The outlook has also weakened in Brazil, where the fight against inflation has provoked a strong monetary policy response, which will weigh on domestic demand.
A similar dynamic is at work in Mexico, although to a lesser extent.
In addition, always according to IMF forecasts, the downgrade of the United States brings with it the prospect of weaker-than-expected external demand from Mexico in 2022.
As for Russia, the forecast is marginally marked down due to a weak harvest and a worse-than-expected third wave.
South Africa‘s growth forecast was downgraded in light of a softer-than-expected second half of 2021 and a weaker outlook for investment as business confidence remains subdued.
