2023 is expected to be even “tougher” than 2022 as the U.S., EU and Chinese economies slow down, according to the head of the International Monetary Fund (IMF).
The Ukraine conflict, soaring prices, hiked interest rates and unrelenting Covid in China will continue to exert an impact on the global economy, Kristalina Georgieva told CBS’ Face the Nation program on Sunday.
“She said: We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people.”
In October, the IMF slashed its outlook for global economic growth in 2023 citing the ongoing conflict in Ukraine, along with tougher monetary policies pursued by central banks around the world in an effort to rein in rising prices, including energy costs. Since then, Beijing has abandoned its zero-Covid policies, having begun to reopen the economy despite the rapid spread of coronavirus infections.
According to Georgieva, China will face a difficult start to 2023, as the world’s second-biggest economy is likely to grow at or below global growth for the first time in 40 years.
The IMF chief warned: “For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on global growth will be negative.”
When it comes to the U.S., Georgieva called the nation the “more resilient,” adding that it might avoid recession with the labor market remaining quite strong.
The IMF chief said: “This is a mixed blessing because if the labor market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down.”
IMF Boss Warns Of Consequences Of New Cold War
An earlier report said:
Attempts by the U.S. and EU to build economic barriers to achieve their geopolitical goals will end up backfiring, the head of the International Monetary Fund (IMF) Kristalina Georgieva has said.
“My concern is a deepening fragmentation in the world economy,” Georgieva said in an interview with the Washington Post on Saturday. “We may be sleepwalking into a world that is poorer and less secure as a result.”
If the rivalry between the U.S. and China splits the global economy into opposing camps, it will shrink by 1.5%, or more than $1.4 trillion annually, she said, adding that the losses in percentage terms for the Asian region will be twice as large.
Bulgarian-born Georgieva recalled that she had “lived through the first Cold War on the other side of the Iron Curtain. And, yeah, it is quite cold out there. And to go on in a second cold war for another generation is very irresponsible.”
The IMF chief said the tariffs on Chinese goods that had been imposed under former U.S. President Donald Trump and kept in force under Joe Biden were one of such counter-productive measures. She didn’t mention the sanctions imposed on Moscow over the conflict in Ukraine or the attempts by Washington and its allies to put price caps on Russian energy.
Some diversification of supply chains might be necessary, especially after the Covid-19 pandemic, but when it goes “goes beyond economic logic, it would be harmful for the U.S. and the rest of the world,” Georgieva pointed out.
The IMF chief warned: “It is important to think through actions and what they may generate as counter actions carefully, because once you let the genie out of the bottle, it is hard to put it back in.”
However, the IMF chief suggested that a complete split between the U.S. and China would likely be impossible. The annual trade between the world’s two top economies currently stands at $600 billion, and they are deeply interconnected, she explained.
It is The New Normal In Germany
High energy prices will become a new reality in Germany, Finance Minister Christian Lindner warned on Sunday.
In an interview with Bild newspaper, Lindner admitted that Berlin is facing the prospect of more expensive energy in the long term without Russia’s natural gas.
“It will be a new normal. Gas via the liquid gas terminals is more expensive than Russian pipeline gas for logistic reasons alone. So, the price level remains higher, but without ruinous spikes,” he said.
Over the course of the past year, natural gas prices in Europe spiked to unprecedented levels several times, driven by sanctions on Russia and disruptions in pipeline supplies. This saw inflation soar across the EU.
To protect consumers from such spikes, EU countries agreed in December to set an emergency cap on wholesale gas prices at €180 ($191) per megawatt hour (MWh), with the measure set to take effect on February 15.
Gas prices have been declining in recent weeks, however, due to unseasonably warm winter weather in parts of Europe, among other factors.
On Monday, the cost of front-month natural gas futures on the TTF hub in the Netherlands plunged to just over €73 ($78) MWh in household terms, a level not seen since last February.
Despite the current decline, however, gas prices remain several times higher than the long-term average. In the 2017-2019 period, before the pandemic and the current energy crisis, TTF gas spot prices were trading in the €10-25 MWh range.
