A third of global economy expected to be in recession

A third of global economy expected to be in recession in 2023, says IMF chief

New Delhi CNN —

This year will be tougher for the global economy than the one we’ve been through, warned International Monetary Fund (IMF) chief Kristalina Georgieva.

“Why that? Because the big three economies, US, EU and China are all slowing down at the same time,” she said in an interview aired on CBS on Sunday.

“We expect a third of the world economy to be in recession,” she said, adding that even for countries that aren’t in recession, “it would feel like a recession for hundreds of millions of people.”

While the US might end up avoiding a recession, the situation looks bleaker in Europe, which has been hit hard by the war in Ukraine, she said. “Half of the European Union will be in recession,” added Georgieva.

The IMF is currently forecasting global growth of 2.7% this year, slowing from 3.2% in 2022.

The slowdown in China will have devastating effects around the world. The world’s second largest economy weakened dramatically in 2022 due to its rigid zero-Covid policy, leaving China out of step with the rest of the world, disrupting supply chains and affecting the flow of trade and investment.

Chinese leader Xi Jinping said this weekend he expects China’s economy to have grown by at least 4.4% over the past year, a figure much stronger than many economists had predicted but much lower than the growth rate of 8 .4% in 2021.

“For the first time in 40 years, China’s growth in 2022 is likely to match or lag global growth,” Georgieva said. “Before Covid, China could have delivered 34, 35, 40% of global growth. It doesn’t anymore,” she said, adding that it was a “pretty stressful” time for Asian economies.

“When I talk to Asian leaders, they all start with this question: ‘What will happen to China? Will China return to a higher level of growth?’ ” She said.

Beijing abandoned Covid restrictions in early December and while its reopening could bring much-needed relief to the global economy, the recovery will be unpredictable and painful.

China’s arbitrary reopening has sparked a wave of Covid cases that are overwhelming the healthcare system and thus dampen consumption and production.

The next few months will be “tough for China and the impact on Chinese growth would be negative,” Georgieva said, adding that she expects the country to gradually come to “higher levels of economic output” and end the year better than it will start the year.”