Recession will hit a third of the world this year, IMF warns– Jan 2023
IMF chief, Kristalina Georgeiva, raises concerns about the global economy due to the slowdown in China from the spread of COVID-19. The US, EU and China are all slowing simultaneously with one third of the world economy to be in recession. In October, IMF cut its 2023 outlook for global economy growth, citing the continuing drag from the war in Ukraine as well as inflation pressures and interest rate hikes by major central banks. For the first time in 40 years, China’s annual growth is likely to be at or below global growth as a result of the severe containment policy. Georgieva mentioned that China could drag down worldwide economic activity rather than propelling it.
The US is likely to escape the worst of the downturn, thanks in part to its strong labour market with unemployment standing at 3.7%, Georgieva said. Late last month, US gross domestic product for the third quarter was revised higher to 3.2%, from 2.9% in November. However, economists polled by the Financial Times expect US unemployment to jump to 5.5% this year and 85 per cent of economists surveyed expect a recession in 2023.
Economic forecasters at Capital Economics have said there is a 90% chance that the US is in a recession in the next six months. “While the US recession is likely to be mild, the eurozone will suffer a larger downturn due to the huge hit to its terms of trade caused by the Ukraine war,” Capital Economics said in December. Global inflation is forecast to decline from 2022’s staggering 8.8% to 6.5% in 2023, while the world’s output will slow to 2.7% in the new year.