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IMF says China recovery could be ‘very quick’

Gopinath says China’s strong economic recovery strongly may push up oil or energy prices

China could see a sharp recovery in economic growth from the second quarter onwards based on current infection trends after the dismantling of most Covid-19 restrictions, IMF deputy managing director Gita Gopinath said.

“We expect growth in China to come back, to rebound,” Gopinath told Reuters in an interview at the World Economic Forum in Davos.

“Looking at the infection trends, and if those persist, we could see a very quick recovery starting from after the first quarter of this year,” she said of a current surge in infections seen as an “exit wave” linked to the economic reopening.

China’s economy grew three percent in 2022, one of its worst economic performances in nearly half a century, hit by strict Covid curbs and a property market slump.

Economists polled by Reuters see Chinese growth in 2023 at around 4.9 percent, with some of them recently upgrading forecasts to around 5.5 percent.

Gopinath said that a growth rate “in the four percent-plus ballpark” would likely mean that any global inflationary pressures would be counter-balanced by the slowdown in demand elsewhere.

“But if growth in China comes in much more strongly, which is a possibility, then we could see another spike in oil prices or energy prices,” she said.

Asked about recent US inflation readings that suggest a cooling, Gopinath said it was too early to say for sure whether they meant that inflation was heading durably back down to the US Federal Reserve’s target of two percent.

“If we get readings similar to what we saw in the last month or two for another few months then we’ll be in a good place,” she said, noting that the labour market remained tight.