MARRAKESH, Morocco: The IMF warned Tuesday it is “crucial” that confidence is restored in China’s real estate industry, with officials particularly anxious about the sector’s impact on financial stability.

The IMF revised down its growth forecasts for China earlier on Tuesday, under the weight of a real estate crisis threatening the world’s second biggest economy.

“We are particularly concerned with financial stability in China,” said Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, warning the housing market had “come under pressure in recent years.”

He said that authorities had “taken steps to stabilize the housing market” but that local governments remained exposed, plus “local banks, particularly provincial banks, as well as the wealth management products to the real estate market.”

“So ensuring that the financial system continues to work, that households continue to have a positive outlook on the economy are very important for growth and financial stability in particular going forward,” he added.

The Chinese economy is now expected to grow by 5.0 percent this year–down from 5.2 percent previously–and slow further to 4.2 percent in 2024, down from 4.5 percent.

Fabio Natalucci, deputy director of the Monetary and Capital Markets Department, said it was “really crucial at this point to restore confidence in the real estate sector.”

Natalucci said the two priorities should be completing existing housing projects and restructuring weak developers.

Earlier Tuesday the IMF’s chief economist, Pierre-Olivier Gourinchas, had called for urgent action from Beijing to ensure that instability in the real estate sector did not destabilize the financial system.

Many leading Chinese property developers have come under increasing financial pressure over recent years, with astronomical levels of debt bringing bankruptcy concerns to the fore in a sector already damaged by the coronavirus pandemic and a broader economic slowdown in China.

The debt-saddled giant Country Garden–one of China’s biggest property developers–said Tuesday that it did not expect to meet all of its offshore payment obligations in time as it edges towards a potential default.

Country Garden had racked up debts estimated at 1.43 trillion yuan ($196 billion) by the end of 2022.

Its rival, property developer Evergrande, holds debt adding up to more than $300 billion and defaulted in 2021.