2023 will be a tough year for much of the world’s economies, the head of the International Monetary Fund said on Sunday, as the main engines of global growth — the United States, Europe and China — experience weaker economic activity.
IMF Managing Director Kristalina Georgieva said on CBS’ Sunday morning news show “Face the Nation” that the new year will be “harder than the one we left behind.” .
“Why? Because the big three economies — the U.S., the EU and China — are all slowing down at the same time,” she said.
In October, the International Monetary Fund cut its forecast for global economic growth in 2023, reflecting the war in Ukraine as well as the continued drag on inflationary pressures and high interest rates by central banks such as the Federal Reserve aimed at pushing those price pressures into the market. heel.
Since then, China has rolled back its zero-coronavirus policy and begun a chaotic reopening of its economy, even as consumers in the country remain cautious as coronavirus cases surge. In his first public comments since the policy change on Saturday, President Xi Jinping called for greater efforts and unity as China entered a “new phase”.
“For the first time in 40 years, China’s growth in 2022 could match or fall below global growth,” Georgieva said.
In addition, Georgieva, who traveled to China late last month on IMF business, said the expected “bush fire” of COVID infections in the coming months could further hit its economy this year and weigh on regional and global increase.
“I was in China last week, in a bubble in a city with zero COVID,” she said. “But once people start traveling, it doesn’t last long.”
“China is going to be tough in the coming months, the impact on China’s growth will be negative, the regional impact will be negative, the impact on global growth will be negative,” she said.
In its October forecast, the IMF put China’s gross domestic product growth at 3.2% last year, in line with the fund’s global outlook for 2022. At the time, it also projected China’s annual growth rate would accelerate to 4.4% in 2023, while global economic activity would slow further.
However, her comments suggest that the IMF may downgrade its China and global growth outlook again later this month, when it usually publishes its latest forecasts on the sidelines of the World Economic Forum in Davos, Switzerland.
U.S. economy ‘most resilient’
Meanwhile, the U.S. economy is emerging from the fore, possibly avoiding an outright contraction that could affect a third of the world’s economy, Georgieva said.
“The U.S. is the most resilient,” she said, and it “probably avoids a recession. We see that the labor market is still pretty strong.”
But that fact itself presents risks, as it could hinder the progress the Fed needs to make to restore U.S. inflation to its target level from a four-decade high hit last year. Inflation is showing signs of peaking by the end of 2022, but it remains nearly three times the Fed’s 2% target by the Fed’s preferred measure.
“It’s … a mixed blessing because if the labor market is very strong, the Fed may have to keep rates tight for longer to bring inflation down,” Georgieva said.
Last year, in the most aggressive tightening since the early 1980s, the Fed raised its benchmark policy rate from near zero in March to a current range of 4.25% to 4.50%, a mark Fed officials expected last month to top 5%. Close to 2023, which is the highest level since 2007.
Indeed, the U.S. job market will be the focus of Fed officials who want to see a slowdown in labor demand to help reduce price pressures. The first week of the new year brought a slew of key employment data, including Friday’s monthly non-farm payrolls report, which is expected to show the U.S. economy created an additional 200,000 jobs in December and the unemployment rate held at 3.7% — close to the lowest since the 1960s.
(Aside from the title, this story is unedited by NDTV staff and published via a syndicated feed.)
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