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IMF warns 2023 will be tougher than last year for global economy

The US, European Union and China all face economic downturns in 2023

Theo Andrew

a man in a red shirt

Global economies will face a tougher year than the previous 12 months as all major growth engines face weakening activity, Kristalina Georgieva, managing director of the International Monetary Fund (IMF), has warned.

In an interview with CBS, Georgieva (pictured) said the new year will be “tougher than the year we leave behind, because the big three economies – the US, the European Union and China – are all slowing down simultaneously”.

Last October, the IMF downgraded its outlook for 2023 global economic growth from 2.9% to 2.7% as the impact of the Russian war on Ukraine as well as inflationary pressures and high-interest rate environments drag on economies.

Georgieva added the scrapping of China’s ‘zero-COVID-19’ policy and its rapid reopening will also have a major impact on global growth in 2023.

“For the first time in 40 years, China's growth in 2022 is likely to be at or below global growth,” she continued. “I was in China last week, in a bubble in a city where there is zero-COVID-19, but that is not going to last once people start travelling.

“For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative.”

The IMF said China’s growth forecast for 2022 was 3.2% last October, before hitting 4.4% in 2023, however, there are now signs this will be revised down at the next update later this month.

Georgieva added the US is the most resilient and that it “may avoid a recession” if the labour market remains strong.

“If the resilience of the US labour market holds, that would help the world to get through a very difficult year,” she said.

However, she added this would be a “mixed blessing” as it would likely lead the Federal Reserve to raise interest rates further in a bid to bring down inflation to its targeted level of 2%, from its November headline reading of 7.1%.

The Fed rose interest rates again in December to 4.25% to 4.5% – up from 0% in March – its highest rate in 15 years.

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