2023 will be a tough year for much of the world economy as the main engines of global growth – the US, Europe and China – all experience flagging activity, the head of the International Monetary Fund has warned.
The new year will be “tougher than the year we are leaving behind,” IMF Executive Director Kristalina Georgieva told CBS’s Face the Nation news program on Sunday.
“Why that? Because the big three economies – the US, the EU and China – are all slowing down at the same time,” she said.
“We expect a third of the global economy to be in recession. Even in countries that aren’t in recession, it would feel like a recession for hundreds of millions of people,” she added.
IMF FORECAST 2023: “We assume that a third of the global economy will be in recession,” says IMF Managing Director Kristalina Georgieva @margbrennan. But a strong US job market could help the world weather a difficult year, she says. pic.twitter.com/Vbhj478pFo
— Face The Nation (@FaceTheNation) January 1, 2023
In October, the IMF lowered its forecast for global economic growth in 2023, reflecting the ongoing burden of the war in Ukraine, as well as inflationary pressures and high interest rates that central banks like the US Federal Reserve have been devising to alleviate those price pressures Hoe.
Georgieva said China, the world’s second-biggest economy, is likely to grow at or below global growth for the first time in 40 years as Covid-19 cases surge after dismantling its ultra-tight zero-Covid policy.
“For the first time in 40 years, China’s growth in 2022 is likely to match or lag global growth,” Georgieva said.
2023 will be a difficult year for the world. The silver lining is that we can use it to transform economies and accelerate changes that are good for our climate and 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) December 29, 2022
In addition, a “bushfire” of expected Covid infections there is likely to continue hitting the economy in the coming months, hurting both regional and global growth, said Georgieva, who traveled to China for IMF business late last month.
“The next few months would be difficult for China, and the impact on Chinese growth would be negative, the impact on the region would be negative, the impact on global growth would be negative,” she said.
Meanwhile, Georgieva said, the US economy is on the sidelines and could avoid the outright contraction that is likely to afflict up to a third of the world’s economies.
The “US is the most resilient,” she said, and it “can avoid a 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 tight longer to bring inflation down,” Georgieva said.
The US jobs market will be a key focus for Federal Reserve officials, who would like to see demand for labor ease to ease price pressures. The first week of the new year brings a slew of key data on the jobs front, including Friday’s monthly nonfarm payrolls report, which showed the US economy added another 200,000 jobs in December and the unemployment rate at 3.7 % remained – near the lowest since the 1960s.
Portal contributed to this report