International Monetary Fund (IMF) Managing Director Kristalina Georgieva has warned that this year will be “tougher than the year we leave behind” for most of the global economy as the US, the EU and China experienc slowing growth.
Speaking to a US media outlet, she argued that one-third of the world’s economies expects to be in recession and that “even countries that are not in recession, it would feel like a recession for hundreds of millions of people.”
“Why? Because the three big economies, [the] US, EU, China, are all slowing down simultaneously,” Georgieva underscored.
She added 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. 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 traveling,” the IMF head noted.
Georgieva voiced hope that China’s growth will improve towards the end of the year but added that there are concerns about the country’s 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 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?'” she said.
According to her, the EU has been especially hard hit by the Ukraine conflict, with half of the bloc expected to be in recession this year. She also suggested that as far as the US economy is concerned, it could avoid a contraction in 2023.
“The US is most resilient. The US may avoid recession. We see the labor market remaining quite strong. This is, however, [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," she stressed.
The remarks came after the IMF predicted that global growth would slow to about 2.7% next year in its World Economic Outlook published in October 2022, 0.2 percent lower than the IMF's July forecast.
Aside from the global financial crisis and the peak of the COVID-19 pandemic, this is “the weakest growth profile since 2001,” the IMF noted, arguing that “the worst is yet to come, and for many people, 2023 will feel like a recession.”