IMF Chief: Global Economy Heading for 2023 Recession

Facts

• One-third of the global economy will be in recession this year, International Monetary Fund (IMF) chief Kristalina Georgieva said Sunday, warning of a "tough year” as the three largest economies — the US, the EU, and China — are showing slower growth rates.
• Georgieva's warning comes amid the Ukraine war, rising inflation, and higher interest rates. The IMF chief warned that China, the world's second-largest economy, and Asia are facing a difficult start to 2023 after Beijing abandoned its "zero-Covid" policy and began reopening its economy.
• While the EU has been hit particularly hard economically due to the Ukraine war's impact, and half of the bloc will slip into recession. The US may, however, be able to avoid a recession, Georgieva claimed.
• Other studies, however, suggest that the US may slide into recession in the coming months, with the Fed reportedly predicting the unemployment rate rising to 4.6% in 2023 while forecasting only modest overall growth.
• In October 2022, the IMF cut its global economic growth outlook for 2023 to 2.7%, down from 2.9% in July, with the Eurozone growing only by 0.5 percent due to higher energy prices. According to the IMF, controlling inflation had the highest priority in stabilizing the global economy.
• Meanwhile, China's Pres. Xi Jinping said on Saturday the PRC's GDP exceeded ¥120T ($17.4T) in 2022, suggesting the economy grew at least 4.4%; many economists had forecast the country's growth to slow to 3% last year. Some economists project a growing possibility of a solid Chinese economic rebound later in 2023.

Sources: Al Jazeera, BBC News, CNN, Reuters, and Fortune.

Narratives

• Narrative A, as provided by Economist. A deep, protracted recession will manifest thanks to Putin’s invasion of Ukraine, soaring food and energy costs, a catastrophic debt crisis in the developing countries, sky-rocketing inflation, and visible cracks in longstanding geopolitical certainties. Policy actions that could deter the inevitable would worsen inflation — setting the stage for an even worse downturn. While no one can predict how severe and how long it may last, the next 12 months are likely to be difficult.
• Narrative B, as provided by Guardian. Despite many grim forecasts, a crippling global recession can be avoided with the right fiscal policies. While 2023 may be tougher than 2022 for the global economy, the upcoming slump does not qualify as a recession. Despite the slow growth rate, many economies have handled the economic pressures better than anyone thought possible six months ago. Positive growth among developing economies may outweigh advanced economies' negative growth, enabling the world to thwart the downturn's effects.

Predictions