One Third Of World Economy In Recession This Year, Warns IMF Chief

IMF Managing Director Kristalina Georgieva added that half of the European Union will likely be in a recession this year

Outlook Business Desk

Updated on: 2 January 2023 9:23 am

IMF MD Kristalina Georgieva

A third of the global economy will experience recession in 2023, head of the International Monetary Fund (IMF) said on Sunday.

Compared to 2022, this year will be tougher as the US, European Union (EU) and China are all slowing simultaneously, IMF Managing Director Kristalina Georgieva told CBS in an interview.

She said half of the EU will likely be in a recession this year and added, “Even countries that are not in recession, it would feel like recession for hundreds of millions of people.”

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In October, the IMF had cut its outlook for global economic growth in 2023 citing the continuing war in Ukraine, inflation pressures, and the tightening of interest rates by major central banks around the world.

In China’s case, the rapid spread of Covid following the discontinuation of the zero-Covid policy will result in a fresh economic blow in the short term, Georgieva said. "For the first time in 40 years, China's growth in 2022 is likely to be at or below global growth," she said.

The IMF Managing Director was in China last month where she stayed in a zero-Covid bubble. However, she expects a “bushfire” of infections in the coming months once people start travelling again.

In the October forecast, IMF projected China’s gross domestic product (GDP) growth at 3.2 per cent. Georgieva’s recent comments, however, suggest that the international financial institution might further cut China’s growth outlook, as well as global forecast, when they release updated projections during the World Economic Forum in Davos, Switzerland later this month.

According to Georgieva, the US may escape the global contractions due to its resilient labour market. She said, “The US economy is remarkably resilient...(and) may avoid recession. We see the labour market remaining quite strong.”

Bank of America’s chief economist Michael Gapen, who was also speaking on CBS, however, commented that there is high risk of recession in the US. He added that the recession may not be a deep or long-lasting one.