For much of the global economy, 2023 is going to be a tough year as the main engines of global growth – the United States, Europe, and China – all experience weakening activity, the head of the International Monetary Fund said on Sunday.
The New Year is going to be “tougher than the year we leave behind,” IMF Managing Director Kristalina Georgieva said on the CBS Sunday morning news program “Face the Nation.”
“Why? Because the three main economies – the U.S., EU, and China – are all slowing down simultaneously,” she said.
In October, the IMF cut its outlook for global economic growth in 2023, reflecting the continuing drag from the war in Ukraine as well as inflation pressures and the high-interest rates engineered by central banks like the US Federal Reserve aimed at bringing those price pressures to heel.
Since then, China has changed its Covid policy and embarked on a reopening of its economy. President Xi Jinping on Saturday called in a New Year’s address for more effort and unity as China enters a “new phase.”
“For the first time in 40 years, China’s growth in 2022 is likely to be at or below global growth,” Georgieva said.
Meanwhile, Georgieva said, the US economy is standing apart and may avoid the outright contraction that is likely to afflict as much as a third of the world’s economies.
The “US is most resilient,” she said, and it “may avoid recession. We see the labor market remaining quite strong.”
But that fact on its own presents a risk because it may hamper the progress the Fed needs to make in bringing US inflation back to its targeted level from the highest levels in four decades touched last year.
Inflation showed signs of having passed its peak as 2022 ended, but by the Fed’s preferred measure, it remains nearly three times its 2 percent target.
“This is … a mixed blessing because if the labor market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down,” Georgieva said.