IMF chief: Recession to hit 1/3 of global economy in 2023

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(NewsNation) —  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 warned.

The new year is going to be “tougher than the year we leave behind,” Kristalina Georgieva, managing director of the International Monetary Fund, said in an interview Sunday with the CBS television network’s “Face the Nation.”

“Why? Because the three big economies – the U.S., EU and China – are all slowing down simultaneously,” she said.

Over the weekend, a report showed that Chinese manufacturing contracted for a third consecutive month in December, the biggest drop since February 2020, as the country grapples with a nationwide COVID-19 surge after suddenly easing anti-epidemic measures.

A monthly purchasing managers’ index declined to 47.0 from 48.0 in November, according to data released from the National Bureau of Statistics on Saturday. Numbers below 50 indicate a contraction in activity.

It’s uncertain what impact removing strict COVID-19 policies that crimped production for raw materials and goods and discouraged travel will have on the global economy.

The specter of recession in the U.S. and other major economies, as well as a prolonged slump in China, are factors overhanging markets.

“We expect one-third of the world economy to be in recession,” Georgieva said.

“And yes … even countries that are not in recession, it would feel like recession for hundreds of millions of people,” she continued.

Georgieva said, however, that the U.S. economy was “remarkably resilient,” and that measures such as the Inflation Reduction Act and child tax credit measures were “good for the U.S. Good for the world.”

The minutes of the Fed’s meeting potentially will give investors more insight into its next moves. The government will also release its November report on job openings Wednesday. That will be followed by a weekly update on unemployment on Thursday. The closely watched monthly employment report is due Friday.

Wall Street is also waiting for corporate earnings reports that are due to start flowing in around mid-January. Companies have told investors inflation will likely crimp their profits and revenue in 2023, even after they raised prices on everything from food to clothing to offset inflation, helping to pad their profit margins.

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