PanamaTimes

Monday, Feb 26, 2024

Third of world in recession this year, IMF head warns

Third of world in recession this year, IMF head warns

A third of the global economy will be in recession this year, the head of the International Monetary Fund (IMF) has warned.
Kristalina Georgieva said 2023 will be "tougher" than last year as the US, EU and China see their economies slow.

It comes as the war in Ukraine, rising prices, higher interest rates and the spread of Covid in China weigh on the global economy.

In October the IMF cut its global economic growth outlook for 2023.

"We expect one-third of the world economy to be in recession," Ms Georgieva said on the CBS news program Face the Nation.

"Even countries that are not in recession, it would feel like recession for hundreds of millions of people," she added.

Katrina Ell, an economist at Moody's Analytics in Sydney, gave the BBC her assessment of the world economy.

"While our baseline avoids a global recession over the next year, odds of one are uncomfortably high. Europe, however, will not escape recession and the US is teetering on the verge," she said.

The IMF cut its outlook for global economic growth in 2023 in October, due to the war in Ukraine as well as higher interest rates as central banks around the world attempt to rein in rising prices.

Since then China has scrapped its zero-Covid policy and started to reopen its economy, even as coronavirus infections have spread rapidly in the country.

Ms Georgieva warned that China, the world's second largest economy, would face a difficult start to 2023.

"For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative," she said.

The IMF is an international organisation with 190 member countries. They work together to try to stabilise the global economy. One of its key roles is to act as an early economic warning system.

Ms Georgieva's comments will be alarming for people around the world, not least in Asia which endured a difficult year in 2022.

Inflation has been steadily rising across the region, largely because of the war in Ukraine, while higher interest rates have also hit households and business.

Figures released over the weekend pointed to weakness in the Chinese economy at the end of 2022.

The official purchasing managers' index (PMI) for December showed that China's factory activity shrank for the third month in a row and at the fastest rate in almost three years as coronavirus infections spread in the country's factories.

In the same month home prices in 100 cities fell for the sixth month in a row, according to a survey by one of the country's largest independent property research firms, China Index Academy.

On Saturday, in his first public comments since the change in policy, President Xi Jinping called for more effort and unity as China enters what he called a "new phase".

The downturn in the US also means there is less demand for the products that are made in China and other Asian countries including Thailand and Vietnam.

Higher interest rates also make borrowing more expensive - so for both these reasons companies may choose not to invest in expanding their businesses.

The lack of growth can trigger investors to pull money out of an economy and so countries, especially poorer ones, have less cash to pay for crucial imports like food and energy.

In these kinds of slowdowns currencies can lose value against those of more prosperous economies, compounding the issue.

The impact of higher interest rates on loans affects economies at the government level too - especially emerging markets, which may struggle to repay their debts.

For decades the Asia-Pacific region has depended on China as a major trading partner and for economic support in times of crisis.

Now Asian economies are facing the lasting economic effects of how China has handled the pandemic.

The manufacture of products such as Tesla electric cars and Apple iPhones may get back on track as Beijing ends zero-Covid.

But renewed demand for commodities like oil and iron ore is likely to further increase prices just as inflation appeared to have peaked.

"China's relaxed domestic Covid restrictions are not a silver bullet. The transition will be bumpy and a source of volatility at least through the March quarter," Ms Ell said.
Newsletter

Related Articles

PanamaTimes
Apple warns against drying iPhones with rice
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
Global Law Enforcement Dismantles Lockbit Ransomware Operation
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
The President of Argentina Javier Mile does not fly private, he flies commercial, with the citizens he represents. And they LOVE him for it.
Bitcoin Reaches $50,000 for First Time in Over Two Years
Belo Horizonte: Brazil's Rising Carnival Hotspot for 2024
In El Salvador, the 'Trump of Latin America' stuns the world with a speech slamming woke policing after winning a landslide election
Tucker’s interview with Putin is over 50M views on X within the first 5 hours.
Finnish Airline, Finnair, is voluntarily weighing passengers to better estimate flight cargo weight
President Nayib Bukele has proudly announced El Salvador's remarkable achievement of becoming the safest nation in the Western Hemisphere.
Former Chilean President Sebastian Piñera Dies in Helicopter Crash
This farmer seems to understand science a bit more than the event organizer, Klaus Schwab.
Facebook turns 20: From Mark Zuckerberg's dormitory to a $1trn company
The Coolest Dictator in the World" on the Path to Victory in El Salvador
Macron, France and fake news
Indian-Origin Man 'King' Arrested For Smuggling $16 Million Drugs Into US
Can someone teach Americans that not every person with slanted eyes is Chinese?
Europe's Farmers Feeding the People, Protesting Against Politicians Who Do Nothing for Their Country and Serve Only Themselves at Taxpayers' Expense
Paris Restaurant That Inspired 'Ratatouille' Loses $1.6 Million Worth Of Wine
Brazilian Police Investigate Bolsonaro's Son for Alleged Illegal Spying
Police in Brazil Raid Residence of Bolsonaro Associate Over Allegations of Illegal Spying
Border Dispute Escalates as Texas Governor Vows Increased Razor Wire
OpenAI Enhances ChatGPT-4 Model, Potentially Addressing AI "Laziness" Issue
The NSA finally acknowledges spying on Americans by acquiring sensitive data
Report Reveals Toxic Telegram Group Generating X-Rated AI-Generated Fake Images of Taylor Swift
US Border Patrol States 'No Plans' to Remove Razor Wire Installed in Texas
Bitcoin Experiences Approximately 20% Decline in Value
Klaus Schwab recently appointed himself as the Earth's "trustee of the future."
DeSantis Drops Out, Endorses Trump.
Nikki Haley said former President Trump is "just not at the same level" of mental fitness as he was while president in 2016.
Residents of a southern Mexican town set the government palace on fire in response to the police killing of a young man
Samsung Launches AI-Driven Galaxy S24, Ushering in New Smartphone Era
Judge Questions SEC's Regulatory Overreach in Coinbase Lawsuit
The Ecuador prosecutor who was investigating the television studio attack, has been assassinated.
Is artificial intelligence the solution to cyber security threats?
Vivek Ramaswamy suspends his US election campaign and endorses Trump.
Viral Satire: A Staged Satirical Clip Mistaken as Real Footage from the 2024 World Economic Forum in Davos
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Ecuador Reports 178 Hostages in Prison Gang Standoff
The Startling Cuban Espionage Case That Has Rattled the US Government
Two Armed Men in Ecuador, Dressed as Batman and The Joker Storm the Streets.
Armed Gang Raids Ecuadorian TV Station Following State of Emergency Declaration
Anti-Democratic Canada: Journalist Arrested for Questioning Canadian Finance Minister on Support of Terrorist Group
Ecuador's 'Most-Wanted' Criminal Vanishes from Prison
Mexican Cartel Supplied Wi-Fi to Locals Under Threat of Fatal Consequences for Non-Compliance
Border Surge Leads to Over 11,000 Migrants Waiting in Northern Mexico
Outsider Candidates Triumph in Latin American Elections
As Argentina Goes to the Polls, Will the Proposal to Replace the Peso with the Dollar Secure Votes?
Fatal Shark Attack Claims Life of Boston Woman Paddleboarding Near Bahamas Resort, According to Police
×