BEIJING: The International Monetary Fund on Tuesday cut its growth forecasts for China for this year and 2023 as strict Covid curbs and a crisis in the property sector fuel a slowdown in the world’s number two economy.

China’s gross domestic product is expected to expand 3.2 percent this year, the IMF said in its quarterly global forecast, down 0.1 percentage point from its previous forecast in July.

That would be the country’s weakest growth in around four decades, excluding the first year of the pandemic, according to data from the government and the World Bank.

The IMF said growth would pick up to 4.4 percent next year, though that would still be a 0.2 percentage point drop on its previous estimate.

Both figures are well below Beijing’s stated GDP growth target for this year of around 5.5 percent, a figure many analysts believe is now unattainable.

China last year recorded healthy expansion of 8.1 percent, albeit from a lower base owing to the impact of virus lockdowns in 2020.

World Bank, IMF see rising risks of global recession

But the world’s most populous nation has stuck fast to a policy of extinguishing new outbreaks as they emerge, unlike many countries which have moved to reopen as the public health threat from the virus has receded.

Characterised by snap lockdowns, mass testing and lengthy quarantines, the zero-Covid strategy has “taken a toll on the economy, especially in the second quarter of 2022”, the IMF said in its World Economic Outlook report.

A creeping crisis in the “rapidly weakening” real estate market – which accounts for about a quarter of annual GDP – “will weigh heavily on global trade and activity”, added the Washington-based institution.

“A worsening of China’s property sector crisis could spill over to the domestic banking sector and weigh heavily on the country’s growth” with potentially global consequences, it warned.

The slowdown in China comes as the global economy is battered by surging interest rates aimed at fighting soaring prices that have been triggered by Russia’s war in Ukraine as well as global supply chain snarls.

Beijing has sought to mitigate low growth in recent months with a series of easing measures to provide support, slashing key interest rates and pumping cash into the banking system. But observers say the effects do little to mitigate the impact of the strict lockdowns.

China is due to release its third-quarter growth figures and a number of other economic indicators this month.

Growth slumped to just 0.4 percent in the three months through June, the country’s worst performance since the early days of the pandemic.