Global economy: 2023 will be worse as the US, Europe, and China face a decline. – IMF.

According to the head of the International Monetary Fund, 2023 will be a challenging year for most of the global economy as the primary drivers of global growth, the United States, Europe, and China, all see diminishing activity.

IMF Managing Director Kristalina Georgieva predicted that the coming year would be “tougher than the year we leave behind” on the CBS Sunday morning news show “Face the Nation.”

“Why? Because all three of the world’s major economies—the U.S., the EU, and China—are experiencing simultaneous slowdowns.

The ongoing drag of the Ukraine War, inflationary pressures, and the high-interest rates imposed by central banks like the U.S. Federal Reserve to quell those price pressures were all factors that led to the IMF cutting its projection for global economic growth in 2023 in October.

Since then, China has abandoned its zero-COVID policy and started a chaotic economic recovery, but as coronavirus cases rise, customers, there are still scared. President Xi Jinping on Saturday urged for more effort and unity as China enters a “new chapter” in his first public remarks since the policy change.

According to Georgieva, China’s growth in 2022 “is expected to be at or below global growth for the first time in 40 years.”

Furthermore, Georgieva, who recently visited China on IMF business, predicted that a “bushfire” of anticipated COVID infections there in the coming months will likely severely hurt its economy this year and hinder regional and global growth.

She stated, “Last week I was in China, in a bubble in a city where there is zero COVID. But once people start traveling, it won’t be the case anymore.

She predicted that the coming months would be difficult for China, which would have a detrimental effect on the country’s progress as well as that of the region and the entire world.

Chinese GDP growth for 2022 was estimated by the IMF to have been 3.2% in its October forecast, which is comparable to the global outlook for 2022. At that time, it was also observed that while global activity slowed further, China’s yearly growth accelerated to 4.4% in 2023.

However, her remarks imply that another cut to the growth outlooks for China and the world could be coming later this month, when the IMF regularly releases updated predictions during the World Economic Forum in Davos, Switzerland.

“MOST RESILIENT” U.S. ECONOMY

The U.S. economy is now holding its own and may avoid the outright recession that is projected to affect up to a third of the world’s economies, according to Georgieva.

She claimed that the United States is the most resilient and might avoid recession. The labor market is expected to continue remarkably robust.

But that fact alone poses a risk since it might obstruct the Fed’s efforts to reduce U.S. inflation from the highest levels in four decades reached last year to its desired level. As 2022 came to a close, inflation began to show indications of having peaked, but by the Fed’s preferred standard, it is still close to three times its objective of 2%.

This is “a mixed blessing,” according to Georgieva because if the labor market is particularly robust, the Fed could need to maintain higher interest rates for a longer period of time in order to reduce inflation.

The Fed increased its benchmark policy rate from near zero in March to the current range of 4.25% to 4.50% last year in the most dramatic policy tightening since the early 1980s, and Fed policymakers predicted this month that it will exceed the 5% barrier in 2023, a level not seen since 2007.

Indeed, Fed officials will be concentrating their attention on the U.S. labor market as they hope to see a decline in the demand for labor to help temper price pressures. A slew of significant employment-related data will be released in the first week of the New Year, including Friday’s nonfarm payrolls report, which is anticipated to show that the U.S. economy added 200,000 jobs in December and that the unemployment rate stayed at 3.7%, which is close to its lowest level since the 1960s.