The head of the International Monetary Fund (IMF) has warned that this year will be tougher than 2022 for most of the global economies as the United States, European Union and China see slowing growth.
IMF Managing Director Kristalina Georgieva said 2023 will be a “tough year”, with one-third of the world’s economies expected to be in recession.
“Why? Because the three big economies, [the] US, EU, China, are all slowing down simultaneously,” Georgieva said during an appearance on the CBS programme “Face the Nation” on Sunday.
The remarks come after the IMF in October cut its global growth forecast to 2.7 percent, down from 2.9 percent forecast in July, amid headwinds including the war in Ukraine and sharply rising interest rates.
Georgieva said that 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 surge following the dismantling of its ultra-strict “zero-COVID” policy.
“That has never happened before. And looking into next year, for three, four, five, six months the relaxation of COVID restrictions will mean bushfire COVID cases throughout China,” Georgieva said. “I was in China last week, in a bubble in the city where there is ‘zero COVID’. But that is not going to last once the Chinese people start travelling.”
Georgieva said that she is expecting China’s growth to improve towards the end of the year but there are concerns about its longer-term trajectory.
“Before COVID, China would deliver 34, 35, 40 percent of global growth. It is not doing it anymore. It is actually quite a stressful for … the Asian economies. When I talk to Asian leaders, all of them start with this question, ‘What is going to happen with China? Is China going to return to a higher level of growth?’”
Meanwhile, the EU has been especially hard hit by the war in Ukraine, with half of the bloc expected to be in recession this year, Georgieva said.
The IMF chief said, however, that the US economy has stood out for its resilience and could outright avoid contraction this year.
“The US is most resilient. The US may avoid recession,” she said.
According to her, “We see the labour market remaining quite strong. This is, however, [a] mixed blessing because if the labour market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down.”
By Vincent Kubi