According to the lead of the international Monetary Fund, 2023 will be a stimulating year for most of the comprehensive economy as the primary variables of global growth, the United States, Europe, and China, all see diminishing activity.
IMF Managing Director and lead Kristalina Georgieva predicted on the “Face the Nation” segment of the CBS Sunday morning news programme that the coming year will be more difficult than the one that just ended.
Why? because all three of the world’s major economies—the U.S., the EU, and China—are experiencing simultaneous slowdowns.
The ongoing drag from the conflict in Ukraine, inflationary pressures, and the high-interest rates set by central banks such as the U.S. Federal Reserve to tame those price pressures led the IMF to lower its projection for global growth in 2023 in October.
Since then, China has abandoned its zero-COVID policy and started a chaotic economic recovery, but as coronavirus cases rise customers are still scared.
President Xi Jinping called for more commitment and solidarity as China begins a new chapter in his New Year’s speech on Saturday, his first public remarks since the policy change.
Georgieva believed China’s expansion in 2022 is expected to be equal to or lower than the world growth rate for the inaugural time in 40 years.
Furthermore, when she visited China on IMF work late last month, a wildfire of anticipated COVID infections there in the coming months is likely to significantly hurt its economy this year and impact on both local and global growth.
She claimed that while she was in China the other week, it was in a cocoon in a part of the city with no COVID. But once people start travelling, it won’t be the case anymore.
She predicted that the coming months would be difficult for China, which would have a detrimental effect on the country’s progress as well as that of the region and the world.
Chinese GDP growth for 2018 was estimated by the IMF to have been 3.2% in its October forecast, which is comparable to the global vision for 2022.
At that time, although the rest of the world’s economy continued to stagnate, China’s yearly growth increased to 4.4% in 2023.
Her remarks, however, imply that another cut to the growth outlooks for both China and the world could be in store for later this month, when the IMF usually releases new projections at the World Economic Forum in Davos, Switzerland.
The U.S. economy is now holding its own and may avoid the outright recession that is projected to affect approximately a third of the world’s economies, based on the story by Georgieva.
The U.S. is the most resilient and might avoid a recession. It seems certain that the labour market will continue to be extremely robust.
But that fact alone poses a risk since it might obstruct the Fed’s efforts to reduce U.S. inflation from the highest heights in four decades reached last year to its desired level.
As 2022 came to a close, inflation began to show hints that it had peaked, but under the Fed’s preferred metric, it is still close to three times its 2% goal.
Georgieva said this is a mixed blessing since if the labour market is particularly robust, the Fed could need to keep interest rates higher for a longer period of time in order to reduce inflation.
The Fed increased its benchmark policy interest rate from nearly 0 in March to the present upper setting of 4.25% to 4.50% last year in the most dramatic policy tightening ever since the early 1980s, and Fed policymakers predicted this month that it will exceed the 5% barrier in 2023, a figure not seen since 2007.