Global Economy To Face Challenges In 2023: IMF Chief Georgieva

The main engines of global growth – the United States, Europe and China – will all experience weakening activity in 2023, according to the chief of the International Monetary Fund (IMF) on Sunday.

The new year will be “tougher than the year we leave behind,” IMF Managing Director Kristalina Georgieva said on CBS's “Face the Nation” Sunday morning news programme.

“Why? Because the three major economies – the United States, the European Union and China – are all slowing down at the same time,” she said. 

The IMF cut its forecast for global economic growth in 2023 in October, citing the ongoing drag from the Ukraine war, as well as inflationary pressures and the high-interest rates engineered by central banks such as the US Federal Reserve to counteract those price pressures.

Since then, China has abandoned its zero-Covid policy and begun a chaotic reopening of its economy, though consumers in the country remain cautious as coronavirus cases rise.

President Xi Jinping called for more effort and unity in his first public remarks since the policy change in a New Year's address on Saturday, as China enters a “new phase.”

“China's growth in 2022 is likely to be at or below global growth for the first time in 40 years,” Georgieva said.

Furthermore, a “bushfire” of Covid infections expected in the coming months is likely to wreak havoc on the country's economy this year, weighing on both regional and global growth, according to Georgieva, who visited China on IMF business late last month.

“I was in China last week, in a bubble in a city with no Covid,” she said and added that however, once people start travelling, that will not last.

“It will be difficult for China in the coming months and the impact on Chinese growth will be negative, the impact on the region will be negative and the impact on global growth will be negative,” she said.

The IMF forecasted Chinese GDP growth last year at 3.2 per cent in October, which was in line with the fund's global outlook for 2022. It also predicted that annual growth in China would accelerate to 4.4 per cent in 2023, while global activity would slow further.

Her remarks, however, imply that another cut to both China and global growth forecasts is possible later this month when the IMF typically releases updated forecasts during the World Economic Forum in Davos, Switzerland.