For most of the world’s economies, 2023 will be a difficult year as the main engines of global growth – the United States, Europe and China – are experiencing a slowdown, the head of the International Monetary Fund said on Sunday.
The new year will be tougher than the year we left the IMF, IMF Managing Director Kristalina Georgieva said on the CBS Sunday morning news program “Face the Nation.”
“Why? Because the three big economies – the US, the EU and China – are all going down at the same time,” he said.
In October, the IMF revised down its outlook for global economic growth in 2023, reflecting the continued trauma from the war in Ukraine and inflationary pressures on high interest rates created by central banks such as the US Federal Reserve. Reserve to bring the price pressure. heel.
Since then, China has lifted its zero-Covid policy and begun to restart its economy in chaos, although consumers there remain cautious as the number of coronavirus infections rises. In his first public speech since the policy change, President Xi Jinping on Saturday called in a New Year’s address for greater efforts and unity as China enters a “new order.”
“For the first time in 40 years, China’s growth in 2022 is likely to reach or be below global growth,” Georgieva said.
Also, the “forest fire” of the COVID disease that is expected there in the coming months may fall on its economy this year and attract both regionally and internationally, said Georgieva, who visited China on IMF business late last month.
“I was in China last week, in a bubble in a country where there is no COVID,” he said. “But that won’t last until people start traveling.”
“In the next few months, it will be difficult for China, and the impact on China’s growth will be bad, the impact on the region will be bad, the impact on global growth will be bad,” he said. .
In the October forecast, the IMF pegged Chinese gross domestic product last year at 3.2% – in line with the global financial outlook for 2022. At that time, it also saw annual growth in China accelerating in 2023 until 4.4% as world activity continues to slow. .
However, his comments suggest a further slowdown in China and global growth prospects could be out at the end of this month when the IMF unveils updated forecasts during the World Economic Forum in Davos, Switzerland.
US economy ‘strongest’
In the meantime, Georgieva said, the US economy is isolated and it can avoid the agreement that can cause up to a third of the world’s economy.
He said, “The US is the strongest, and it can avoid recession. We see the labor market is still strong.”
But that fact itself presents a risk because it could hinder the Fed’s progress in bringing US inflation back to target levels from the highest level in four decades touched on this year. past. Inflation has shown signs of surpassing its peak by the end of 2022, but by the Fed’s preferred rate, it remains at nearly three times the 2% rate.
“This is … a mixed blessing because if the labor market is strong, the Fed can keep interest rates low for a long time to bring down inflation,” Georgieva said.
Last year, in one of the tightest policy stretches since the early 1980s, the Fed raised its benchmark policy rate to near zero in March to a range of 4.25% to 4.50%, and Fed officials last month predicted to break the 5% mark. in 2023, a level not seen since 2007.
In fact, the US labor market will be a key focus for Fed officials who will want to see the demand for jobs strengthened to help ease price pressures. The first week of the new year brings key data on the jobs front, including Friday’s monthly payrolls report, which is expected to show the US economy added 200,000 jobs in December and unemployment rate remained at 3.7% – recently. the lowest since the 1960s.
(Apart from the headline, this story has not been edited by NDTV staff and has been published online.)
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