On Tuesday, April 14th, the International Monetary Fund (IMF) lowered its expectations for China’s economic growth to reflect the impact of the Iran war on the economy. The IMF urged the Beijing authorities to reduce reliance on exports.
In its flagship report “World Economic Outlook” released on Tuesday, the IMF predicted China’s economic growth rate for 2026 to be 4.4%, down 0.1 percentage point from its January forecast. The official growth target set by the Chinese government for 2026 is 4.5% to 5%. This official target has always been a must “achieve,” even if it means through data manipulation.
IMF’s Chief Economist, Pierre-Olivier Gourinchas, stated that the forecast for China is partly based on the export growth momentum in 2025 and the US reducing tariffs on China.
IMF mentioned that domestic economic activities in China are weak, especially in the housing market, which will continue to constrain China’s economic growth.
The report predicts that by 2027, China’s economic growth rate will slow to 4% due to “structural unfavorable factors – including continued weakness in the real estate market, decreasing labor force, declining investment return rates, and slowing productivity growth – becoming increasingly apparent.” The downturn in the Chinese real estate market has persisted for five years.
Currently, China’s economy is largely relying on exports for growth, but the reliability of exports as a growth engine is declining. After strong export growth in January and February 2026, export growth slowed in March.
Gourinchas reiterated the call for Beijing to reduce its reliance on exports to drive economic growth.
The increase in commodity prices due to the Iran war is being passed on to China’s export commodity prices. Furthermore, the war will weaken the purchasing power of consumers in other markets, with slowing import demand from various countries ultimately acting as a restraining factor on China’s exports.
The IMF report warned, “The global economy is facing a series of chain reactions, including the direct impact of rising commodity prices, the indirect impact on inflation expectations (usually particularly sensitive to energy and food prices), and amplified effects due to financial market hedging sentiment.”
The IMF forecasts a global Gross Domestic Product (GDP) growth rate of 3.1% in 2026, down 0.2 percentage points from its January forecast.
The report stated that the impact of the war on low-income and developing economies as well as Gulf energy-exporting countries will be more severe, as these countries are facing challenges of infrastructure destruction and export disruptions. Developed economies like the US are expected to fare better, but they will not be unscathed.