The managing director of the International Monetary Fund, Kristalina Georgieva, warned that the global economy faces “a tough year, tougher than the year we are leaving behind”.
“We expect one-third of the world economy to be in recession,” Georgieva told CBS’ “Face the Nation” in an interview that aired Jan. 1. “Why? Because the three major economies (U.S., EU and China ) are simultaneously slowing down.”
The IMF already warned in October that more than a third of the world economy will contract and that there is a 25% chance that global GDP will grow by less than 2% in 2023, which it defines as a global recession.
Examining CBS’s three largest economies, Georgieva painted a mixed picture of their ability to weather the recession.
While “the United States can avoid recession,” the European Union has been “very badly hit by the war in Ukraine: half of the EU will be in recession next year,” he said. At the same time, China is facing a “tough year”.
Data released on Saturday showed that China’s abrupt reversal of its Zero Covid policy pushed economic activity in December to the slowest pace since February 2020 as the virus ravaged major cities and pushed people to stay at home and businesses to close.
The slowdown in the largest economies “translates into negative trends globally – when we look at emerging markets in developing economies, there the picture is even more dire,” Georgieva said.
Manufacturing purchasing managers’ index numbers released on Monday showed negative readings in Europe, Turkey and South Korea. Data released on Tuesday will reveal similar figures for Malaysia, Taiwan, Vietnam, the United Kingdom, Canada and the United States.
Still, the outlook for the world’s largest economy may offer respite.
“If this resilience of the US labor market holds, the US would help the world through a very difficult year,” Georgieva said.