A third of the global economy will face recession this year, Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has warned.
Georgieva, who gave the warning at the weekend in a chat with CBS, an American broadcast television and radio network, noted that economic activities in the United States (U.S.), the European Union and China are crawling simultaneously.
She said: “We expect one-third of the world economy to be in recession. Half of the European Union (EU) will be in a recession this year.”
Georgieva further explained that the rapid spread of COVID-19 in China, especially now that the government has dropped its severe containment policy, means that the country faces a fresh economic blow in the short term.
The IMF boss said the next couple of months will be “tough for China” due to the spread of the deadly virus.
The projection of the IMF boss aligns with that of Goldman Sachs, a multinational investment bank that global economic growth will slow to 1.8 per cent in 2023.
The IMF, had in October, cut its 2023 outlook for global economic growth, citing the continuing drag from the war in Ukraine as well as inflation pressures and interest rate hikes by major central banks.
Georgieva said: “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.
“For the first time in 40 years, China’s annual growth is likely to be at or below global growth, meaning it could drag down worldwide economic activity rather than propelling it. That has never happened before.”
Georgieva noted that the U.S. may likely escape the worst of the downturn, adding that its strong labour market might help it to outperform most other majors.
She said. “The U.S. may avoid a recession because its unemployment is so low. If that resilience holds in 2023, the U.S. would help the world to get through a very difficult year. The U.S. economy is remarkably resilient.”
Last year, the bank of England said the United Kingdom (UK) economy was set for a five-quarter recession starting at the end of 2022 — with the gross domestic product (GDP) shrinking.