This year is going to be tougher on the global economy than the one we have left behind, the International Monetary Fund’s (IMF) chief Kristalina Georgieva has warned.
“Why? Because the three big economies, US, EU, China, are all slowing down simultaneously,” she said in an interview that aired on CBS Sunday.
“We expect one third of the world economy to be in recession,” she said, adding that even for countries that are not in recession: “It would feel like recession for hundreds of millions of people.”
While the US may end up avoiding a recession, the situation looks more bleak in Europe, which has been hit hard by the war in Ukraine, she said. “Half of the European Union will be in recession,” Georgieva added.
The IMF currently projects global growth to be at 2.7% this year, slowing from 3.2% in 2022.
The deceleration in China will have a dire impact globally. The world’s second largest economy weakened dramatically in 2022 because of its rigid zero-Covid policy, which left China out of sync with the rest of the world, disrupting supply chains and damaging the flow of trade and investment.
Chinese leader Xi Jinping said this weekend that he expected China’s economy to have expanded by at least 4.4% last year, a figure much stronger than many economists had predicted but much lower than the 8.4% growth rate seen in 2021.
“For the first time in 40 years China’s growth in 2022 is likely to be at or below global growth,” Georgieva said. “Before Covid, China would deliver 34, 35, 40% of global growth. It is not doing it anymore,” she said, adding that it is “quite a stressful” period for Asian economies.
“When I talk to Asian leaders, all of them start with this question, ‘What is going to happen with China? Is China going to return to a higher level of growth?’ ” she said.
Beijing abandoned Covid restrictions in early December, and while its reopening may provide some much-needed relief to the global economy, the recovery is going to be erratic and painful.
China’s haphazard reopening has unleashed a wave of Covid cases that have overwhelmed the health care system, dampening consumption and production in the process.
The next couple of months will “be tough for China, and the impact on Chinese growth would be negative,” Georgieva said, adding that she expects the country to move gradually to a “higher level of economic performance, and finish the year better off than it is going to start the year.”