Economic downturn in these 3 countries will impact the world in 2023: IMF

For much of the global economy, 2023 will be a difficult year as the main engines of global growth – the United States, Europe and China – all experience a slowdown in activity, the chief said on Sunday. of the International Monetary Fund.

The new year is going to be “more challenging than the year we leave behind,” IMF Managing Director Kristalina Georgieva said on CBS’s Sunday morning news program “Face the Nation.”

“Why? Because the big three economies – the US, EU and China – are all slowing down simultaneously,” she said.

In October, the IMF cut its outlook for global economic growth in 2023, reflecting the continued slowdown in the war in Ukraine as well as inflationary pressures and high interest rates designed by central banks like the US Federal Reserve to bring back these price pressures to heel.

China has since abandoned its zero-Covid policy and embarked on a chaotic reopening of its economy, though consumers there remain wary of rising coronavirus cases. In his first public comments since the policy change, President Xi Jinping on Saturday called in his New Year speech for more effort and unity as China enters a “new phase”.

“For the first time in 40 years, China’s growth in 2022 is expected to be equal to or lower than global growth,” Georgieva said.

Additionally, a “bushfire” of COVID infections expected in the coming months is expected to hit its economy again this year and dampen regional and global growth, said Georgieva, who visited China on government business. IMF at the end of last month.

“I was in China last week, in a bubble in a city where there is no COVID,” she said. “But that’s not going to last once people start traveling.”

“In the next two months, it will be difficult for China, and the impact on Chinese growth will be negative, the impact on the region will be negative, the impact on global growth will be negative,” he said. she stated.

In the October forecast, the IMF pegged China’s gross domestic product growth last year at 3.2%, matching the fund’s global outlook for 2022. At that time, it also saw annual growth in China accelerate in 2023 to 4.4% while global activity slows further. .

His comments, however, suggest another reduction in the outlook for Chinese and global growth could be on the cards later this month, when the IMF generally unveils updated forecasts at the World Economic Forum in Davos, Switzerland.

THE “MOST RESILIENT” AMERICAN ECONOMY

Meanwhile, Georgieva said, the US economy is holding its own and could avoid the outright contraction that is expected to hit up to a third of global economies.

“The United States is the most resilient,” she said, and it “could stave off recession. We’re seeing the labor market remain quite strong.”

But that fact in itself poses a risk because it can hamper the progress the Fed needs to make to bring U.S. inflation back to its target level from the highest levels in the four decades hit last year. Inflation showed signs of having passed its peak at the end of 2022, but according to the Fed’s preferred measure, it remains almost three times its target of 2%.

“It’s … a mixed blessing because if the labor market is very strong, the Fed may have to hold interest rates tighter for longer to bring inflation down,” Georgieva said.

Last year, in the most aggressive policy tightening since the early 1980s, the Fed raised its key rate from near zero in March to the current range of 4.25% to 4.50%, and Fed officials predicted last month that it would cross the 5% mark. in 2023, a level not seen since 2007.

Indeed, the US labor market will be the focus of Fed officials who would like to see labor demand ease to help reduce price pressures. The first week of the new year brings a slew of key data on the jobs front, including Friday’s monthly nonfarm payrolls report, which is expected to show the U.S. economy added 200,000 new jobs in December and the unemployment rate remained at 3.7% – near the lowest since the 1960s.

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)