IMF Chief Warns One Third of Global Economy to Enter Recession in 2023

According to the International Monetary Fund’s (IMF) chief Kristalina Georgieva, the global economy is expected to face a tough year in 2023 due to simultaneous slowdowns in the three largest economies – the US, EU, and China. Georgieva stated in an interview with CBS Sunday that “we expect one third of the world economy to be in recession,” even for countries that are not officially in a recession, it will “feel like recession for hundreds of millions of people.” The IMF projects global growth to be at 2.7% this year, a decrease from 3.2% in 2022.

While the US may avoid a recession, the situation is expected to be worse in Europe, which has been significantly impacted by the war in Ukraine. Georgieva estimates that “half of the European Union will be in recession.” China’s deceleration will also have a global impact as the world’s second largest economy weakened significantly in 2022 due to its rigid zero-Covid policy, disrupting supply chains and trade and investment flows.

Chinese leader Xi Jinping recently announced that he expects China’s economy to have expanded by at least 4.4% in 2022, a figure that is stronger than many economist predictions but significantly lower than the 8.4% growth rate seen in 2021. Georgieva stated that “for the first time in 40 years China’s growth in 2022 is likely to be at or below global growth,” adding that it is “quite a stressful” period for Asian economies.

As Beijing lifted Covid restrictions in early December, its reopening may provide some relief to the global economy, but the recovery is expected to be uneven and difficult. The wave of Covid cases that have followed the reopening has strained the healthcare system and impacted consumption and production. Georgieva expects the next couple of months to be difficult for China, but predicts that the country will eventually return to a “higher level of economic performance” by the end of the year.