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GBO_Kristalina Georgieva

Recession will hit one-third of world economy in 2023: IMF chief Kristalina

Kristalina Georgieva stated that she anticipated China's growth to improve before the end of the year

The chief of the International Monetary Fund (IMF) has warned that this year will be more complex than 2022 for most global economies due to sluggish growth in the United States, the European Union, and China.

According to IMF Managing Director Kristalina Georgieva, 2023 will be a “tough year” with one-third of the world’s economies predicted to be in recession.

“Why? Because the three major economies—the US, the European Union, and China—are all slowing down simultaneously,” Kristalina Georgieva said.

The comments follow the IMF’s October downgrade of its global GDP outlook from 2.9% to 2.7% due to factors such as the conflict in Ukraine and significantly rising interest rates.

According to Kristalina Georgieva, China, the second-largest economy in the world, is set to expand at or below global growth for the first time in 40 years as COVID-19 instances rise due to the country’s rigorous “zero-COVID” policy being abandoned.

It’s never happened like that before. Kristalina Georgieva says that if COVID restrictions are eased, there will be wildfires in China for three, four, five, and six months of the following year. “Last week, I visited China, staying in a bubble in the ‘zero COVID’ city. But once Chinese citizens start travelling, that won’t continue.

Although there are concerns about China’s longer-term trajectory, Kristalina Georgieva stated that she anticipated China’s growth to improve before the end of the year.

“Before COVID, China would contribute 34, 35, or 40% of the global growth. It has stopped doing it. The Asian economies are under quite a bit of stress. What will happen to China? This is the first thing every Asian leader asks me when we speak. Will China’s growth rate resume at a greater level?”

According to Kristalina Georgieva, the war in Ukraine has particularly hurt the EU, with half of the bloc anticipating a recession this year.

However, according to the head of the IMF, the US economy has distinguished itself for its resiliency and may altogether avoid decline this year.

“The US is the toughest.” However, the recession may not hit the US, she suggested.

“We anticipate continued strength in the labor market.” This is a mixed blessing, though, as the Fed might need to keep interest rates higher for longer to reduce inflation if the labor market is very robust.

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