Kristalina Georgieva, managing director, International
Monetary Fund (IMF), has warned that a
third of the global economy will face recession this year.
Georgieva spoke in an interview with CBS, an American
broadcast television and radio network, on Sunday.
She said economic activities in the United States, the
European Union, and China are all slowing simultaneously.
“We expect one-third of the world economy to be in
recession,” the IMF managing director said.
“Half of the European Union will be in a recession this
year.”
Georgieva further explained that the rapid spread of
Covid-19 in China, especially now that the government has dropped its severe
containment policy, means that the country faces a fresh economic blow in the
short term.
She said the next couple of months will be “tough for China”
due to the spread of the deadly virus.
The projection of the IMF boss aligns with that of Goldman
Sachs, a multinational investment bank, that global economic growth will slow
to 1.8 percent in 2023.
The IMF, had in October, cut its 2023 outlook for global
economic growth, citing the continuing drag from the war in Ukraine as well as
inflation pressures and interest rate hikes by major central banks.
“For the next couple of months, it would be tough for China,
and the impact on Chinese growth would be negative, the impact on the region
will be negative, the impact on global growth will be negative,” Georgieva
said.
“For the first time in 40 years, China’s annual growth is
likely to be at or below global growth, meaning it could drag down worldwide
economic activity rather than propelling it. That has never happened before.”
Georgieva also said the US is likely to escape the worst of
the downturn, adding that its strong labour market was likely to help it
outperform most other majors.
“The US may avoid a recession because its unemployment is so
low,” she said.
“If that resilience holds in 2023 the US would help the
world to get through a very difficult year. The US economy is remarkably
resilient.”
Last year, the bank of England said the United Kingdom’s
economy was set for a five-quarter recession starting at the end of 2022 — with
the gross domestic product (GDP) shrinking.
Recall that China said it will scrap its quarantine measures
for inbound travellers from January 8.
Following the announcement, countries have begun to impose
travel restrictions on travellers arriving from China, as about 50 percent of
passengers on two flights arriving in Milan, Italy, from the Asian country
reportedly tested positive for COVID.
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