IMF director prediction: 2023 will be tough year for Global Economy

Key Takeaways:

• A third of the global economy will experience a recession this year, according to the head of the International Monetary Fund (IMF).
• The world economy is currently being weighed down by the conflict in Ukraine, rising costs, higher interest rates, as well as the spread of Covid in China.
• The BBC received an analysis of the world economy from Katrina Ell, an economist with Moody’s Analytics in Sydney.

According to the International Monetary Fund’s (IMF) chief, this year will see a third of the world’s economy in a recession.

As the economies of the US, EU, as well as China slow, 2023 will be “tougher” than last year, according to Kristalina Georgieva.

The war in Ukraine, rising costs, higher interest rates, and also the spread of Covid in China are currently weighing down the world economy.

The IMF reduced its prediction for world economic growth in October 2023.

Ms Georgieva asserted that “we expect one-third of the international economy to be in recession” on the CBS news programme Face the Nation.

She continued that for hundreds of millions of individuals, it would feel like a recession, even in countries that are not experiencing one.

An economist at Moody’s Analytics in Sydney named Katrina Ell provided the BBC with her global economy analysis.

“Our baseline assumes that there won’t be a global recession in the coming year, but the likelihood is uncomfortably high. However, the US is on the verge of collapse, and Europe will not escape the recession, “She said.

The IMF got down its forecast for a global economic rise in 2023 as a result of the war in Ukraine and higher interest rates as central banks all around the world work to contain inflation.

Since that time, despite the country’s rapid spread of coronavirus infections, China has abandoned its zero-Covid policy and reopened its economy.

China, the 2nd-largest economy of the world, would likely have a difficult start to 2023, Ms Georgieva warned.

She predicted that the coming months would be difficult for China, which would have a negative effect on the country’s growth as well as that of the region and also the whole world.

The IMF is a global organisation made up of 190 nations. They work together to stabilise the global economy. One of its most crucial functions is acting as a system for early economic warning.

People worldwide will be alarmed by Ms Georgieva’s comments, particularly in Asia, which had a challenging year in 2022.

Because of the war in Ukraine, inflation has been steadily increasing throughout the region, and higher interest rates have also hurt households as well as businesses.

Over the weekend, data that predicted the state of the Chinese economy in 2022 were made available to the public.

According to the official purchasing managers’ index (PMI) for December, factory activity in China decreased for the 3rd consecutive month by the fastest rate in almost 3 years as covid-19 infections spread throughout the nation’s factories.

In the month, home prices in 100 cities decreased for 6 consecutive months, per the survey conducted by China Index Academy, one of the nation’s biggest independent real estate research firms.

President Xi Jinping demanded more effort and also cooperation as China entered a “new phase” on Saturday in his first public remarks following the policy change.

Because of the US economy’s downturn, there is also less demand for goods made in China as well as in other Asian countries like Thailand and Vietnam.

Because borrowing is more expensive and also interest rates are higher, some businesses might decide not to invest in growing their operations.

A currency’s value against those of more prosperous economies can decline during these slowdowns, aggravating the problem.

Governmental economies are also impacted by higher loan interest rates, particularly in emerging markets, which might find it tough to pay back their debts.

China has been a main trading partner for the Asia-Pacific region for several years and offered economic support during the crisis.

Asian economies are presently dealing with the long-term financial consequences of China’s reaction to the pandemic.

As Beijing ends zero-Covid, production of goods like Tesla electric vehicles and Apple iPhones might resume.

Source from: BBC News