The International Monetary Fund in October forecast US GDP growth for 2023 at 1%. The World Bank on January 10 projected US growth at half a percent for 2023.
IMF Managing Director Kristalina Georgieva said 2023 would be another "tough year" for the global economy, and inflation remained stubborn, but she did not expect another year of successive downgrades like those seen last year, barring unexpected developments.
"Growth continues to slow down in 2023," she told reporters at the IMF's headquarters in Washington. "The more positive piece of the picture is in the resilience of labor markets. As long as people are employed, even if prices are high, people spend... and that has helped the performance."
She added that the IMF does not expect any major downgrades. "That's the good news."
Georgieva said the IMF expected the slowdown in global growth to "bottom out" and "turn around towards the end of '23 and into '24."
Georgieva said there was much hope that China - which previously contributed some 35% to 40% of global growth, but had "disappointing" results last year - would once again contribute to global growth, likely from mid-2023. But that depended on Beijing not changing course and sticking to its plans to reverse its zero-Covid policies, she said.
She said the United States - the biggest economy in the world - was likely to see a soft landing, and would suffer only a mild recession, if it did enter a technical recession.
But Georgieva said great uncertainty remained, including a significant climate event, a major cyberattack or the danger of escalation in Russia's war in Ukraine, for instance through the use of nuclear weapons.
"We are now in a more shockprone world and we have to be open-minded that there could be risk turn that we are not even thinking about," she said. "That's the whole point of the last years. The unthinkable has happened twice."
She cited concerns about growing social unrest in Brazil, Peru and other countries, and the impact of tightening financial conditions remained unclear.
But inflation remained "stubborn" and central banks should continue to press for price stability, she added.
IMF chief says US may be able to avoid recession in 2023
International Monetary Fund Managing Director Kristalina Georgieva has said that there is mounting evidence that the United States can avoid recession this year and achieve a "soft landing" for its economy, Reuters reported on Thursday.
US labor markets remain resilient and consumer demand remains strong despite increases in interest rates to fight inflation, Georgieva told reporters, adding that there has been a healthy shift away from excess goods purchases, which had pressured prices, back toward services demand, and there were more diversified sources of growth in the economy.
"It gives some argumentation of an expectation that the US would avoid falling into recession," she said. "And actually, I would say even if it is in technical terms in recession, that will be a very mild recession," the IMF chief noted.
IMF Chief Urges China to Stay Course on Reopening Economy
Kristalina urged China to move forward with reopening its economy, calling the nation’s transition from a Covid Zero policy to more normal functioning likely the single most important factor for global growth in 2023.
The Washington-based financial institution believes that a world recession can be avoided, even as growth slows from an estimated 3.2% in 2022, Managing Director Kristalina Georgieva told reporters Thursday. If the US, the largest economy, goes into contraction, it will be a mild one, she said.
The fund doesn’t expect a major downgrade of its October forecast for a 2.7% expansion in global GDP when it updates its World Economic Outlook on Jan. 31 in Singapore, Georgieva said. Global growth is likely to bottom out toward the end of the year, with the pace picking up next year, she said.
Inflation remains stubborn, and the job of central banks to tame price increases is not yet finished, she said in a wide-ranging discussion that lasted more than an hour.
“What is most important is for China to stay the course, not to back off from that reopening,” said Georgieva, who visited the world’s second-largest economy last month for the first time since the start of the pandemic. “If they stay the course, by mid-year or there around, China will turn into a positive contributor to average global growth,” she said, calling the nation’s 2022 performance “very disappointing.”
A year after the Covid-19 omicron variant and Russia’s invasion of Ukraine slammed the brakes on the global economy, President Vladimir Putin’s war continues to be a negative factor for investor and consumer confidence, especially in Europe, she said. Potential of a spillover from the war is the risk that would have the biggest impact on economic expansion, although it’s a low-probability event, Georgieva said.
While the world’s lender of last resort sees no systemic debt crisis on the horizon, 60% of low-income nations are at or near distress.
The Group of 20 largest economies along with the IMF and World Bank will hold a global sovereign debt roundtable on the margins of a meeting of central bankers and finance ministers in India next month to bring together representatives from governments, borrowing nations and private lenders to discuss challenges.
Georgieva said that one risk the world is not yet prepared for but may surface later this year is the impact of tighter financial conditions on labor markets and employment. While governments have provided policy support to help workers deal with high energy prices, that ability is shrinking, and down the line people being out of a job amid faster inflation could lead to protests like those seen in nations from Lebanon to Chile in 2019, Georgieva said.
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