IMF Warns Global Economy Faces Tougher 2023

IMF Managing Director Kristalina Georgieva has said that 2023 is going to be a tough year as the main engines of global growth – the US, Europe and China – are all going through weakening activity at the same time.

Speaking in a television interview, she said the new year is expected to be “tougher than the year we leave behind.” In October, the IMF slashed its outlook for global economic growth in 2023, accounting for the continuing drag from the war in Ukraine, as well as high interest rates engineered by central banks.

Since then, China has removed its Zero-COVID policy and embarked on a difficult reopening of its economy. For the first time in four decades, China's reported growth in 2022 will not outstrip global growth.

Further, a surge of expected COVID infections in the months ahead are likely to further hit China’s economy, creating a drag on both regional and global growth.

Georgieva reserved praise for the US economy, predicting it may be the only major world market to avoid outright contraction due to a strong labor market, which is expected to guide it out of recessionary waters.

Georgieva hopes a strong labor market will not hamper any progress the Fed needs to make in returning US inflation to its targeted level of 2%. For the remainder of the world, an unsteady 2023 awaits, with elevated inflation remaining a major worry and Russia’s war in Ukraine continuing to drag on.