One-third of world’s economies expected to be in recession this year – IMF boss

Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva has warned that 2023 will be tougher than the previous year for most of the global economy as the United States, European Union and China experience slowing growth.

The IMF boss said that 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 on Sunday during an interview on ‘Face the Nation’, a CBS programme.

In October 2022, the IMF cut its global growth forecast to 2.7 per cent, down from 2.9 per cent projection in July, amid headwinds including the war in Ukraine and sharply rising interest rates.

Georgieva told CBS 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,” the IMF noted.

However, Georgieva said that she expected 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 per cent 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?’”

At the same time, 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 avoid contraction this year.

“The US is most resilient. The US may avoid recession,” she said.

“We see the labour market remaining quite strong. This is, however, [a] mixed blessing because if the labour market is very strong, the Fed (Federal Reserve) may have to keep interest rates tighter for longer to bring inflation down.”

Last Wednesday, The Gleaner FINANCE reported that technocrats expect the Jamaican economy to grow by 3.0 per cent in 2023, or nearly double the pace of the region, as it benefits from recovery and sectors coming back online.

It was noted however that the growth is projected to be slightly less than initial forecast of 3.3 per cent in April 2022 by the World Economic Outlook, a flagship publication by the IMF. But it still outpaces the growth of the wider Latin America and Caribbean, which is set to grow by 1.7 per cent in 2023, down from initial projections of 2.5 per cent.