IMF predicts a difficult year for the global economy due to slowdown in the US, EU and China

The International Monetary Fund (IMF) has warned that 2023 will be a tougher year for much of the global economy as the economies of the U.S., EU and China all slow simultaneously. “We expect a third of the world economy to be in recession… Even countries that are not in recession, it would feel like a recession for hundreds of millions of people,” said IMF Director Kristalina Georgieva.

IMF economic forecasts for 2023

International Monetary Fund (IMF) Managing Director Kristalina Georgieva shared the IMF’s predictions for the U.S., the European Union, China and the global economy in an interview with CBS that aired Sunday. She detailed:

Here’s what we see in 2023. For most of the world economy, it will be a tough year, tougher than the one we are leaving behind. Why? Because the three major economies, the United States, the European Union and China, are all slowing down simultaneously.

The United States is the most resilient. They could avoid recession. We see that the labor market remains quite strong. This is a mixed blessing, however, because if the labor market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down“, the IMF director continued.

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The European Union has been hit very hard by the war in Ukraine. Half of the European Union will be in recession next year. China will slow down again this year“, she added.

In addition, the IMF boss said:

Next year will be a difficult year for China. And that translates into negative trends globally.

When we look at emerging markets in developing economies, there the picture is even bleaker. Why? Because on top of everything else, they are being hit by high interest rates and the appreciation of the dollar. For economies that have high levels of these factors, it’s a devastation” she warned.

Regarding China specifically, Kristalina Georgieva described, “In the short term, bad news. China has slowed dramatically in 2022 because of this strict zero Covid policy. For the first time in 40 years, China’s growth in 2022 will likely be equal to or less than global growth. This has never happened before.

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Stressing that she hopes the U.S. economy “will not slip into recession despite all these risks,” the IMF Managing Director shared:

We expect a third of the world economy to be in recession…Even in countries that are not in recession, it would feel like a recession to hundreds of millions of people.

Kristalina Georgieva added that “the world changed dramatically“, noting that “the world is more prone to shocks“. She explained that these shocks include Covid, the Russia-Ukraine war and the cost of living crisis.

My message is don’t think we’re going to go back to pre-crisis predictability. More uncertainty, more overlapping crises await us… We need to get our act together and act more nimbly and carefully“, she concluded.

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