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IMF: One third of the world economy will be hit by recession in 2023

2023-01-02 10:55:32Kosova&Bota SHKRUAR NGA REDAKSIA VOX

IMF: One third of the world economy will be hit by recession in 2023

For much of the global economy, 2023 will be a difficult year as the main engines of global growth – the US, Europe and China – are all experiencing weakening 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 told CBS. "... The big three economies – the US, the EU and China – are all slowing at the same time," she said.

"We expect a third of the world economy to be in recession. Even in countries that are not in recession, the recession will be felt by hundreds of millions of people," she added.


In October, the IMF lowered its outlook for global economic growth in 2023, reflecting the drag on of the war in Ukraine, as well as inflationary pressures and high interest rates created by central banks such as the US Federal Reserve, aimed at reducing these price pressures.

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 after reversing 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.

In addition, a wave of expected Covid infections there in the coming months is likely to hit the Chinese economy further and drag regional and global growth, said Georgieva, who traveled to China as the head of the IMF in late of last month.

"For the next couple of months, it 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 holding itself apart and could avoid the outright contraction that is likely to hit a third of the world's economies.

“The US is more resilient,” she said, and “can avoid recession. We see that the labor market remains quite strong."

"This is ... a double-edged sword because if the labor market is very strong, the Fed may have to keep interest rates tighter for longer to reduce inflation," Georgieva said.

The US labor market will be a central focus for Federal Reserve officials, who want to see job demand ease to help reduce price pressures. The first week of the new year brings a number of key data on the employment front, including Friday's monthly nonfarm payrolls report, which is expected to show the U.S. economy added 200,000 jobs in December and the unemployment rate remained unchanged at 3.7% – the lowest since the 1960s.


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