IMF warns: a third of the world economy will fall into recession by 2023

Kristalina IMF

The IMF’s Managing Director, Kristalina Georgieva, warned on Sunday that the world faces a “tougher” year in 2023 than in 2022, saying that a third of the world economy will be affected by recession this year.

“The US, China, and the eurozone are all slowing simultaneously. Half of the European Union will be in recession and over the next few months, China’s growth will be negative and its impact on the region and on global growth will be negative,” Georgieva commented in an interview with CBS.

In her opinion, “China’s growth slowed sharply in 2022 and the spread of Covid is bad news for China and on a global level”.

For Georgieva, the world economy must diversify its supply chains so as not to be so dependent on a single country like China. “It is not just about costs,” she said.

In the case of the United States, the IMF head commented that “it will be able to avoid recession thanks to the strength of the labour market”, although at the same time she stressed that “this means that the Federal Reserve will have to continue to raise interest rates” to fight inflation.

Recession and inflation

The threat of recession has been hovering over the world’s major economies in recent months, a period in which most central banks have adopted more restrictive monetary policies with the aim of curbing inflation, despite the consequences it may have on economic growth.

Beyond the high social cost that these measures may have, Schroders’ analysts remind us that “recessions in developed economies are necessary to curb inflation”.

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