A third of the world economy hit recession by 2023, IMF chief warns | The International Monetary Fund (IMF)
For a large part of the global economy, 2023 will be a tough year as the main engines of global growth – the US, Europe and China – everyone is experiencing a weakening of activity, the head of the International Monetary Fund has warned.
The new year will be “tougher than the year we left behind,” IMF Managing Director Kristalina Georgieva said on the CBS Sunday morning news program Meet the nation on Sunday.
“Why? Because the three major economies – the US, the EU and China – are all slowing down at the same time,” she said.
“We expect a third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people,” she added.
IMF Forecast 2023: “We expect a third of the world economy to be in recession,” says IMF Managing Director Kristalina Georgieva @margbrennan. But a strong American labor market might help the world get through a difficult year, she says. pic.twitter.com/Vbhj478pFo
— Face The Nation (@FaceTheNation) 1 January 2023
In October, the IMF lowered its outlook for global economic growth in 2023, reflecting the continued drag from the war in Ukraine, as well as inflationary pressures and the high interest rates developed by central banks such as the US Federal Reserve to bring those price pressures to a halt.
Georgieva said China, the world’s second-largest economy, is likely to grow at or below global growth for the first time in 40 years as Covid-19 cases rise following the unwinding of its ultra-strict zero-Covid policy.
“For the first time in 40 years, China’s growth in 2022 is likely to be at or below global growth,” Georgieva said.
2023 will be a difficult year for the world. The advantage is that we can use it to transform economies and accelerate change that is good for our climate, good for growth. At the IMF, we recognize our responsibility to be a force for good. Watch the event: https://t.co/Yv1TvfCytH pic.twitter.com/lsrXDDLNyy
— Kristalina Georgieva (@KGeorgieva) 29 December 2022
Moreover, a “bushfire” of expected Covid infections there in the coming months is likely to further hit its economy and drag on both regional and global growth, said Georgieva, who traveled to China on IMF business late last month.
“For the next few months it will be tough for China and the impact on Chinese growth will be negative, the impact on the region will be negative, the impact on global growth will be negative,” she said.
In the meantime, Georgieva said, the American economy stand out and can avoid the outright contraction that is likely to hit as much as a third of the world’s economies.
“The U.S. is most resilient,” she said, and it “can avoid recession. We see that the labor market remains quite strong.”
“This is … a mixed blessing because if the labor market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down,” Georgieva said.
The U.S. labor market will be a key focus for Federal Reserve officials, who want to see labor demand ease to help undercut price pressures. The first week of the new year brings a slew of key data on the employment front, including Friday’s monthly nonfarm payrolls report, which is expected to show the U.S. economy added an additional 200,000 jobs in December and the unemployment rate remained at 3.7% — near record lows since the 1960s.
Reuters contributed to this report
