The International Monetary Fund (IMF) raised its forecasts for China's economic growth to 5 percent this year and 4.5 percent next year, according to its July 2024 World Economic Outlook (WEO) Update released on Tuesday.

The report projected global economic growth to remain at 3.2 percent, the same as the April forecast.

Pierre-Olivier Gourinchas, the IMF's chief economist, said at a news briefing that the forecast for China had risen from 4.6 percent for 2024 and 4.1 percent for 2025 compared with the April outlook.

"And this revision was in part based on stronger consumption numbers in the first quarter of the year, stronger exports also, and that led us to that revision," he said.

"One of the reasons is that we expect that the new program, which is called trading and equipment upgrade, put in place by the Chinese authority, will help boost consumption and investment and growth at the same time," said Jean-Marc Natal, who is the deputy chief of the World Economic Studies Division in the IMF's Research Department.

"We have been recommending a shift towards consumption in the last few years, and this is one step in the right direction," he told reporters at the news briefing.

The China National Bureau of Statistics released its latest economic figures on Tuesday, including that China's GDP grew by 5 percent year-on-year.

Lin Jian, China's Foreign Ministry spokesperson, said: "Judging by this scorecard, the Chinese economy did a pretty good job in the first half of 2024.
"Despite the rising instability and uncertainty in the global economy, China's economy withstood the pressure and played an important role as an anchor and source of strength," said Lin.

The IMF said it still expects the world economy to grow 3.2 percent in 2024, unchanged from its previous forecast in April; It forecast growth of 3.3 percent in 2025, 0.1 percent higher than in April.

"Global growth remains steady," said Gourinchas, estimating that China and India would account for nearly half of global growth this year. The IMF raised its growth forecast for India to 7 percent this year, mainly based on a better outlook for private consumption, especially in rural areas.

Overall, the outlook raised the growth forecast for emerging markets and developing economies in 2024 to 4.3 percent. It also predicted that the euro area's growth is expected to increase to 0.9 percent in 2024 and 1.5 percent next year.

"Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia," said the report.

The IMF lowered expectations for the United States and Japan. The report said due to a "slower-than-expected start to the year", US growth in 2024 was downgraded to 2.6 percent; April's forecast was 2.7 percent. Japan's growth is expected to be 0.7 percent this year, 0.2 percent lower than projected.

Warning that government balance sheets are weak coming out of the pandemic and then vulnerable to new shocks, Gourinchas, in a blog on the July 2024 WEO, called the US a "concerning" example, and that at full employment, it "maintains a fiscal stance that pushes its debt-to-GDP ratio steadily higher, with risks to both the domestic and global economy".

The WEO report also warned that inflation risks have increased, with services prices holding up disinflation, which increases the prospect of interest rates staying elevated longer "in the context of escalating trade tensions and increased policy uncertainty".

"We see an explosion in the number of trade-restrictive measures," Gourinchas said, noting that the measures include export restrictions and industrial policies, and both may lead to retaliation.

"One concern we have is that going forward, this will weigh down on global activity," he said.

The report also said that a resurgence of tariffs could lead to retaliation and a "costly race to the bottom".

"So, let's remember that when we look at the assessment of, for instance, the previous rounds of tariffs that have been imposed by countries, very often the cost assessment finds that it's the country that imposes the tariffs that bear the cost of these tariffs," he said. "And so, it hurts the domestic economy, and it also inflicts spillovers to other countries as well."