HONG KONG - China’s economy is set to expand 5.3 per cent in 2024 as the property sector stabilises and external demand improves, according to the Asean+3 Macroeconomic Research Office (Amro), helping to lift growth in the region.
A gradual property sector recovery in China amid ongoing policy support would boost real estate investment, generating spillovers for the rest of the region, the Singapore-based group said in a report on April 8.
Amro’s forecast is roughly in line with China’s official growth target of about 5 per cent – a number seen as ambitious and that would require more government support to achieve. Challenges facing the economy are rife, despite activity improving at the start of 2024. Economists in a Bloomberg survey see China’s gross domestic product expanding 4.6 per cent in 2024.
“China will continue to be a powerhouse in the region and the main driver of growth,” Amro chief economist Hoe Ee Khor said by phone.
The real estate sector weakness “will take a bit of time to overcome, but it will happen, and we expect the drag on growth will bottom out maybe this year”.
Amro forecasts growth across the Asean nations, plus China, Japan and South Korea, is expected to expand 4.5 per cent in 2024 from 4.3 per cent in 2023.
Domestic demand is likely to remain resilient, underpinned by recovering investment and firm consumer spending. Export recovery, especially in semiconductors, and tourism should provide an additional lift to growth, the group said.
The outlook is not guaranteed. One major risk is China expanding at a slower than expected pace. If growth rose 4.3 per cent in 2024, for example, a full percentage point below Amro’s forecast, regional growth would be reduced by 1.7 percentage points as trade, investment and tourism would be hit.
China, Japan and South Korea make up about three-quarters of Asia’s contribution to global growth.
Here are more details from Amro’s report:
The region’s inflation outlook is muddled. Global commodity prices are set to normalise, but rising domestic demand, geopolitical tensions between the US and China, and country-specific government actions (such as subsidy cuts in Thailand and Malaysia) are set to keep upward pressure on prices.
“Geoeconomic fragmentation” is increasingly a risk. Trade ties between the US and China, the world’s two largest economies, have slowed amid high tariffs, onshoring and tit-for-tat trade actions.
The semiconductor industry is expected to rebound from a multi-year slump as chips demand from China – which makes up about a third of global demand – recovers “briskly” in the second half of 2024. Global chip sales are seen rising 9.5 per cent a year on average in 2025-2026.
There are initial signs of US consumer spending rotating towards goods again. That recovery and continued disinflation should boost demand for Asia’s exports.
Tourist arrivals to Asia are poised to see a full recovery in 2024-2025.
Demographics continues to be an area of concern. People are ageing faster in the Asia region than many other parts of the world, with its total working-age population projected to shrink in the second half of this decade. That would keep a lid on the region’s growth potential and economic stability. BLOOMBERG
