One-third of global economy will be in recession: IMF chief
For those who were expecting a better 2023, the head of the International Monetary Fund (IMF) has a grim warning. The new year is going to be "tougher than the year we leave behind," said Kristalina Georgieva. During the "Face the Nation" news program on CBS, the IMF chief said that one-third of the world would be in recession this year.
Why does this story matter?
2022 ended with more questions than answers. With COVID infections spiking in China and the US Federal Reserve projecting the benchmark policy rate to cross 5%, the economic outlook for 2023 looks ominous. The trend in China is worrying as the Asia-Pacific region has been long been dependent on China. This might, however, open up interesting avenues for New Delhi in the region.
Economic activity is slowing down in US, Europe, and China
During her conversation with Margaret Brennan, Georgieva spoke candidly about IMF's outlook for this year. According to her, this year will be tougher than the previous one "because the three big economies—the US, EU, and China—are all slowing down simultaneously." She attributed the slowdown in activity to the war in Ukraine, rising prices, higher interest rates, and COVID in China.
IMF cuts down growth outlook for 2023 in October
The IMF chief expects one-third of the world economy in recession. "Even countries that are not in recession, it would feel like a recession for hundreds of millions of people," said Georgieva. The organization had cut the global economic growth outlook for 2023. Per the World Economic Outlook Report, economic growth in 2023 will come down to 2.7% from 3.2% in 2022.
COVID infections will impact China's growth
Out of the big economies, Georgieva picked China to have the toughest of times. She said that China's growth in 2022 is likely to be below or the same as global growth for the first time in 40 years. The "bushfire" of COVID infections in the months ahead is likely to affect its economy and negatively impact both regional and global growth.
US may avoid recession, says Georgieva
Per the IMF managing director, the US economy is the "most resilient." She said that "it may avoid recession." "We see the labor market remaining quite strong," Georgieva added. "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."
