Covid, gas crisis… The IMF warns that 2023 will be difficult for the world economy
The IMF wishes you a happy new year, but it doesn’t actually believe it. This can be seen from the interview with Kristalina Georgiyeva on the program ” Face to face with the nation “, was broadcast on the American CBS channel on Sunday morning. The Managing Director of the International Monetary Fund (IMF) expects growth to slow in many countries in 2023. He especially focused on the problems that the United States, Europe and China will have to face during this new year.
It will be a new year more difficult than the year we left behind (…) Why? Because the three major economies—the United States, the European Union, and China—are all slowing at the same time. “The head of the IMF said.
A historic slowdown is in sight for China
Expecting the new year with a weak and even negative growth sign is based on the factors that will slow down the economy in 2022. More specifically, tensions, inflation and rising interest rates related to the war in Ukraine. degrees. But the IMF notes that the global situation could worsen significantly in 2023 due to China. According to Kristalina Georgiyeva, who visited China on behalf of the IMF at the end of December, For the first time in 40 years, China’s growth in 2022 will match or lag global growth “.
If the number of contaminations increases after the end of the “zero Covid” policy last week, the increase should fall further. ” I was in a bubble last week in China, in a city without Covid (…) But that won’t last when people start traveling warned. President Xi Jinping in his New Year’s address on Saturday called for more effort and unity as China enters a “new phase” of the epidemic, with fewer restrictions and more infections on the horizon. will be difficult for and the impact of the spread of Covid-19 cases on Chinese and global growth will be negative.
USA, the big winners in 2023?
Contrary to the Chinese scenario, the economic situation in the United States may improve this year. ” The United States is the most resilient (and) avoidable recession. We believe that the labor market will remain quite strong The executive director of the IMF said. The US economy could avoid a contraction that could affect a third of global economies. But this strong job market and good American consumption” a mixed blessing, because if the labor market is too strong, the Fed may have to keep interest rates tighter for longer to bring down inflation. “Naked Kristalina Georgiyeva.
The US Federal Reserve raised key interest rates by 0.5 basis points in December from 0% in March to 4.50% today. The institution publishes new economic forecasts that foresee at least 75 basis points of additional interest rate growth in 2023. Therefore, the US labor market will be a key concern for Fed officials this year, who also want to see some easing of labor demand. to reduce price pressures.
The first week of the new year will be marked by a number of key data on the jobs front, including the monthly nonfarm payrolls report on Friday. Analysts expect 200,000 additional jobs to be created in December and the unemployment rate to hold steady at 3.7%, the lowest level since the 1960s.
France and Europe destabilized by the Russian gas crisis
In Europe, however, the outlook is less bright. Inflation is not due to the economy overheating (as in the Atlantic), but prices are rising because “The global economy is experiencing the worst energy crisis since the 1970s”, OECD economist Alvaro Santos Pereira explains. The import energy crisis affected everyone, but more strongly Europe, which was 40% dependent on Russian gas before the war, especially suffering from Russia-induced cuts in the context of rising prices.
Faced with this sharp increase in gas and electricity, the European Central Bank also decided to raise interest rates from 0% in the spring to 1.5%-2% in December. Investors even expect it to reach 3.4% next year, versus a previously expected peak of 2.75%. The rate hike was meant to curb price inflation by slowing consumption, investment, and therefore economic activity that wasn’t overheating like our neighbors to the west. As a result, activity in France’s private sector fell more than expected in December to the lowest level since February 2021, according to the PMI Flash indicator published by S&P Global. Decrease in private sector activity “France, the second largest economy in the euro zone, risks of recession in the region is increasing”S&P Global economist Joe Hayes lamented in a press release.
In its latest economic report released this Thursday, December 15, INSEE expects growth of 0.1% in the first quarter of 2023 and a slight acceleration in the second quarter (0.3%).
In turn, the Organization for Economic Cooperation and Development (OECD) expects such a scenario. “Not a global recession, but a sharp slowdown in the global economy in 2023 and still high but declining inflation in many countries,” he said. Alvaro Santos Pereira in a report published in November. For France, the OECD forecasts growth of 2.6% in 2022 and 0.6% next year. However, these prospects are highly dependent on the development of the Russia-Ukraine conflict and the return of Russian gas to Europe, which will lower inflation.
(with agencies)
