NEW YORK, Jan 2 — 2023 will be a tough year for most of the global economy as the main drivers of global growth – the United States, Europe and China – all weaken, the head of the International Monetary Fund said. IMF) said yesterday.
The new year is “going to be more difficult than the year we’re leaving,” IMF Managing Director Kristalina Georgieva said on CBS’ Sunday morning news program. Against Nation.
“Why? Because the big three economies, the US, the EU and China, are all slowing at the same time,” he said.
In October, the IMF cut its forecast for global economic growth in 2023, reflecting the continued drag on the war in Ukraine, as well as inflationary pressures and higher interest rates designed by central banks such as the US Federal Reserve, which aim to keep those prices down. the heel
China has since scrapped its zero-Covid policy and embarked on a chaotic reopening of its economy, although consumers there are wary as coronavirus cases rise. In his first public comments since the policy shift, President Xi Jinping called for more effort and unity in a New Year’s message on Saturday as China enters a “new phase”.
“For the first time in the last 40 years, China’s growth in 2022 is likely to be at or below the global growth rate,” Georgieva said.
Moreover, a “firestorm” of Covid infections expected there in the coming months is likely to hit its economy this year and drag on both regional and global growth, said Georgieva, who traveled to China late last month on IMF business.
“Last week I was in China, in a bubble of a city with zero Covid,” he said. “But that won’t last once people start traveling.”
“The next few months will be difficult for China, and the impact on China’s growth will be negative, the impact on the region will be negative, the impact on global growth will be negative,” he said.
In its October forecast, the IMF pegged China’s gross domestic product growth at 3.2 percent last year, on par with the fund’s 2022 global forecast. slowed down even more.
His comments, however, suggest that another cut to both China’s and global growth prospects could be coming later this month, when the IMF usually releases updated forecasts during the World Economic Forum in Davos, Switzerland.
The US economy is the “most stable”.
At the same time, Georgieva said the U.S. economy stands out and could avoid an outright recession that could affect a third of the world’s economies.
“The US is the most stable,” he said, and “can avoid recession. We see that the labor market remains quite strong.”
But that in itself poses a risk, as it could hamper the progress the Fed needs to make to return US inflation to its target level from last year’s four-decade high. Inflation showed signs of peaking as 2022 wore on, but remains nearly three times its 2 percent target, according to the Fed’s preferred measure.
“This is a mixed blessing because if the labor market is very strong, the Fed may have to hold interest rates longer to reduce inflation,” Georgieva said.
Last year, amid the most aggressive policy tightening since the early 1980s, the Fed in March raised its benchmark interest rate from near zero to its current range of 4.25-4.50 percent, and Fed officials last month predicted it would breach 5 the percent mark in 2023, a level not seen since 2007.
Indeed, the US labor market will be a central focus for Fed officials, who would like to see a softening of labor demand, which would help reduce price pressures. The first week of the new year brings a number of key data on the employment front, including Friday’s monthly nonfarm payrolls report, which is expected to show the U.S. economy added another 200,000 jobs in December and the unemployment rate remained at 3.7 at the percentage level: approx. the lowest since the 1960s. – Reuters
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