Third of world economy to hit recession in 2023, IMF head warns

[Hydrogen]

China’s lagging growth a key threat this year, IMF managing director Kristalina Georgieva said, while the US is ‘most resilient.’

For much of the global economy, 2023 is going to be a tough year as the main engines of global growth – the US, Europe and China – all experience weakening activity, the head of the International Monetary Fund has warned.

The new year is going to be “tougher than the year we leave behind,” IMF managing director Kristalina Georgieva said on the CBS Sunday morning news program Face the Nation on Sunday.

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

In October, the IMF cut its outlook for global economic growth in 2023, reflecting the continuing drag from the war in Ukraine as well as inflation pressures and the high interest rates engineered by central banks like the US Federal Reserve aimed at bringing those price pressures to heel.

Georgieva said that China, the world’s second-largest economy, is likely to grow at or below global growth for the first time in 40 years as Covid-19 cases surge following the dismantling of its ultra-strict zero-Covid policy.

“For the first time in 40 years, China’s growth in 2022 is likely to be at or below global growth,” Georgieva said.

Moreover, a “bushfire” of expected Covid infections there in the months ahead are likely to further hit its economy and drag on both regional and global growth, said Georgieva, who traveled to China on IMF business late last month.

“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,” she said.

Meanwhile, Georgieva said, the US economy is standing apart and may avoid the outright contraction that is likely to afflict as much as a third of the world’s economies.

The “US is most resilient,” she said, and it “may avoid recession. We see the labour market remaining quite strong.”

“This is … a mixed blessing because if the labour market is very strong, the Fed may have to keep interest rates tighter for longer to bring inflation down,” Georgieva said.

The US job market will be a central focus for Federal Reserve officials who would like to see demand for labour slacken to help undercut price pressures. The first week of the new year brings a raft of key data on the employment front, including Friday’s monthly nonfarm payrolls report, which is expected to show the US economy minted another 200,000 jobs in December and the jobless rate remained at 3.7% – near the lowest since the 1960s.


https://www.theguardian.com/business/2023/jan/02/third-of-world-economy-to-hit-recession-in-2023-imf-head-warns

....


Could we witness a decoupling of BRICS (Brazil, Russia, India, China, South Africa) economies? Where some select BRICS nations continue to do well economically, while others trend in the opposite direction?

Reading between the lines, it seems that many nations of the world are taking steps to insulate their native economies from asset and financial contagion. As well as protect themselves against other negative trends associated with declines of the world's largest consumer (USA) and export (china) markets. Although I haven't seen it officially announced, it seems that gold is being bought up in record volumes by major nations of the world who plan to use it as a stablecoin to protect trade against inflation.

Is it fair to say modern day economies have more tools at their disposal to insulate and protect their economy from recession, in contrast to those of previous eras? While fossil fuels and global trade have made modern economies more flexible with larger margins for error? With the internet making communications and data more accessible and abundant with technology like blockchain based open ledgers.

All of which might mean future recessions won't be as bad as they would have had they occurred a century or two in the past.

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[STT]

China is just coming out of its lockdown attempts, the opposite can happen is a story today I have also seen a warning about.   Despite the best attempts of many western governments to restrict the circulation of excess money printed in prior years, there has been little quantitative tightening actually done just these rate rises which is something else.  The longer term picture still contains excessive currency, if China is back to its full use and production it will raise many commodity markets and in turn we are less likely to see a lull in demand within markets.

“bushfire” of expected Covid infections

I agree thats likely but what % of those cases are serious life threatening is going to be quite low, though it might be callous to say perhaps as any deaths are serious it should not be enough vs a working population to be restrictive to the economy or economic productivity.  Whereas a lockdown situation done in a blanket way for years now has been excessive in its effects.

[jackg]

The UK has odd statistics on this now (it could be similar across Europe). There's a recession on paper but I don't think it's being felt too much as vacancies are apparently high (I assume this means there's lots of legitimate job ads - there might not be though, a lot of companies try to survive with one person doing the job of the team around them that quit for as long as possible).

I don't think the brics were that well coupled anyway. Especially looking at China v India over the past few years, they seem to have diverged quite a bit and grow at different rates. The parity of those countries might remain the same but that can be said of most economies anyway. The last report from the US I looked at which tracked global economies seemed to suggest a weak euro would mean for a strong yen (it only tracked Europe, the UK, Japan and the US but I wonder how far that stretches out to other countries around Japan and who's economy they'll track).

[Moneyprism]

initially this recession was only limited to speculation,, but it seems that the issue of this recession has become a reality, especially the statement from the IMF, which is increasingly making people panic and withdrawing their assets from the stock market, and this will create a domino effect and make the recession itself come faster

[el kaka22]

Recession is fine, as long as there is no inflation, recession means we are recovering. Think of it as if you are sick and got a fever, but now you are taking medicine which makes you sweat a lot more. Normally in a healthy person that much sweat is not nice, you would consider that is a bad thing, but in this case a sick person would know it's there to drop their fever by sweating.

This is the same, it is a distasteful thing to have recession, we would prefer not to have it, but if fixes all the inflation issues and goes away in a year then it's good. Remember that period between 2008 crisis and 2011? We went from trouble to nice slowly, it could be that slow again.

[crzy]

Third world economy will probably suffer more compare to other big countries, if those countries still not doing anything to address these issues then in time, they might enter into another recession. In my country, we are starting to feel the effect of higher inflation, and the shortage of supplies, hopefully we will not end on a situation like this because many people will surely suffer, bigger countries should also help other country to lessen their burden especially to the supply chain.

[Gyfts]

Recession is fine, as long as there is no inflation, recession means we are recovering. Think of it as if you are sick and got a fever, but now you are taking medicine which makes you sweat a lot more. Normally in a healthy person that much sweat is not nice, you would consider that is a bad thing, but in this case a sick person would know it's there to drop their fever by sweating.

This is the same, it is a distasteful thing to have recession, we would prefer not to have it, but if fixes all the inflation issues and goes away in a year then it's good. Remember that period between 2008 crisis and 2011? We went from trouble to nice slowly, it could be that slow again.

The recession doesn't hit hard in particular if you're able to keep your job, but even then, wage increases begin to slow down and people effectively get pay cuts. Post COVID/war related inflation means that wage growth won't keep up with inflation.

Inflation isn't necessarily fixed by a recession so you could theoretically end a recession with higher inflation than you began with if the government acts irresponsibly. I don't anticipate that happening here because the current recession is mainly caused by the interest rates being increased to get inflation under control in the first place. Recession didn't have to happen.

[dansus021]

Reccession news in my cuntry is all over the place. Sounds danger actually since we not fully recovered yet finding job is very hard and the wage seem not inrese very much. I hope this year is final year and we come back stronger

[Alpha Marine]

With the internet making communications and data more accessible and abundant with technology like blockchain based open ledgers.

Recession will still hurt but I certainly believe the internet will help. People in countries like America that have a strong labour market are already looking for more jobs. This will help. It is easier to have side hustles with the help of the internet these days. So people can have 2-4 jobs that won't be as stressful as it used to because it can be a remote job. Even if it's not a remote job, it's easier to find jobs online.

When the big economies suffer, economies in Africa suffer the most. This is because they are so reliant on the big economies. The import almost everything from them, so every negative that affects those big economies also affects them and that's a problem.

[cloirecrom]

covid, a lot business dying, add some war on top of it.
doesn't need warning. it already happen in most country

[slapper]

The BRICS economies may begin to decouple, with some nations continuing to do well economically while others may trend in the other way. There are a variety of economic and political variables that may affect the performance of each member of the BRICS group, and these factors may or may not coincide with those of the other members of the group.

Many countries have, in fact, taken precautions to shield their economies from external influences and prevent a financial crisis from spreading. Some examples of this strategy include expanding into new export markets, bolstering local businesses, and amassing a larger gold or other stable asset reserves.

More resources are available to contemporary economies to help them weather a downturn. The increasing adaptability and interconnectedness made possible by international commerce and the internet, as well as the use of technologies like blockchain, may soften the blow of economic downturns.

However, although contemporary economies may be more resistant to recession, they may be more susceptible to economic shocks produced by pandemics or other global crises. The use of gold or other stable assets as a store of value is not a novel idea and has been used by numerous governments in the past.

It is true that contemporary economies have more instruments at their disposal to shield themselves from recession, and a decoupling of the BRICS economies is feasible; nevertheless, it is also vital to recognize the other variables that may impact the economy.

[Kakmakr]

The BRICS countries ...(Brazil, Russia, India, China, South Africa) have so much political problems...that it will be highly unlikely that they will be able to decouple from the global economy. These countries have one thing in common..... they all have leaders that only serve their own interest... and not the interest of their civilians.  

Global markets have a way to adapt and to overcome challenges and changes in their economy.... just look at the shifting of trades, during all those trade restrictions and sanctions and how that was bypassed.  

[Viscore]

Recession is fine, as long as there is no inflation, recession means we are recovering. Think of it as if you are sick and got a fever, but now you are taking medicine which makes you sweat a lot more. Normally in a healthy person that much sweat is not nice, you would consider that is a bad thing, but in this case a sick person would know it's there to drop their fever by sweating.

This is the same, it is a distasteful thing to have recession, we would prefer not to have it, but if fixes all the inflation issues and goes away in a year then it's good. Remember that period between 2008 crisis and 2011? We went from trouble to nice slowly, it could be that slow again.

Hopefully that would be the next goal, to recover from a temporary economic decline brought about by inflation matters. But this would mean another long process to take and it could mean a year or two, hopefully. So maybe the best thing to do for now is to prepare ourselves more so we can combat if there are possible next recessions that will happen.

[puloweh555]

initially this recession was only limited to speculation,, but it seems that the issue of this recession has become a reality, especially the statement from the IMF, which is increasingly making people panic and withdrawing their assets from the stock market, and this will create a domino effect and make the recession itself come faster

This recession has been planned by global elites. This is not a natural recession, but it has been planned when it will happen and when.

the world is made afraid that the country will be in IMF debt. After the crisis, the IMF began to carry out actions to spread the USD so that the USD had a strong demand and could dominate the world.
The function of the IMF, World Bank and Petro dollar is to spread the USD so that the USD has a strong demand.

[Spaceman1000$]

IMF is always wanting to warn nations about economic recession, nations are still struggling to come out of COVID-19 hit,  I believe the economic hit has already happened, because the inflations are here already, the effect of the war between Russia and Ukraine is here already, counties are complaining already.

But I believe the new year poses a new trajectory, nations have been able to sustain economic crisis in last couple of years, so I believe nations will surmount all the  hiccups as against IMF predictions.

[Flexystar]

Or may be BRICS will have to be more stronger than ever before because they will need to be supportive towards each other. Idk, maybe that is why the partnership was made in the first place so that they can help in the time such as this. Also I would not mention them as third world economies, as some of them are really doing great and being competing the developed nations. In fact they are better in handling the recession situation or any other worst situation as compared to the developed nations.

[pixie85]

Reccession news in my cuntry is all over the place. Sounds danger actually since we not fully recovered yet finding job is very hard and the wage seem not inrese very much. I hope this year is final year and we come back stronger

The biggest market declines come before the recession.

The recession may come but it will probably be a boring period where the economy slows down, but prices don't decline anymore. The greatest decline comes in the time where people panic and try to desperately save what they can by letting staff go and getting rid of their more risky investments, which leads to recession.

This slowing and numbness could be observed in bitcoin too where the Terra Luna crash created a much bigger sell off in crypto than FTX despite FTX being a much bigger and more important event with much more money being lost and more people affected.

I don't expect big losses in bitcoin's future.

[Fortify]

Could we witness a decoupling of BRICS (Brazil, Russia, India, China, South Africa) economies? Where some select BRICS nations continue to do well economically, while others trend in the opposite direction?

Reading between the lines, it seems that many nations of the world are taking steps to insulate their native economies from asset and financial contagion. As well as protect themselves against other negative trends associated with declines of the world's largest consumer (USA) and export (china) markets. Although I haven't seen it officially announced, it seems that gold is being bought up in record volumes by major nations of the world who plan to use it as a stablecoin to protect trade against inflation.

Is it fair to say modern day economies have more tools at their disposal to insulate and protect their economy from recession, in contrast to those of previous eras? While fossil fuels and global trade have made modern economies more flexible with larger margins for error? With the internet making communications and data more accessible and abundant with technology like blockchain based open ledgers.

All of which might mean future recessions won't be as bad as they would have had they occurred a century or two in the past.

On average you get a correction every 2-3 years and a recession every 8 years, so it's something that should be expected. Each one comes in a different form and has different triggers, Covid was a rather unique case that popped up out of nowhere and it looks like inflation will play a large part in the next one. It's foolish to try and stop them, as they are a natural remedy to over excess that is common in years where the economy is booming. Even with the financial crisis, it could have been much worse if not for the swift (if not late) intervening by central banks to stop too much contagion. It feels a bit like China is in dangerous territory right now, so you have to wonder if they'll eventually stumble a bit economically speaking.

[AverageGlabella]

China will not be feeling the effects of the lockdowns until a couple of years. Think about it we are now feeling the effects of the pandemic because we have recovered and tried to get back to normal but a lot of companies got hit hard by the pandemic and are trying to recover their losses now they are fully open. The problem is that customers lost their money too and are struggling which reduces the spending which the struggling companies were relying on. A third of the world economy is already struggling but in a couple of years the entire world will be struggling with the aftermaths of the pandemic with russia and ukraine struggling from the war too on top of the pandemic issues.

[Smartprofit]

With the internet making communications and data more accessible and abundant with technology like blockchain based open ledgers.

Recession will still hurt but I certainly believe the internet will help. People in countries like America that have a strong labour market are already looking for more jobs. This will help. It is easier to have side hustles with the help of the internet these days. So people can have 2-4 jobs that won't be as stressful as it used to because it can be a remote job. Even if it's not a remote job, it's easier to find jobs online.

When the big economies suffer, economies in Africa suffer the most. This is because they are so reliant on the big economies. The import almost everything from them, so every negative that affects those big economies also affects them and that's a problem.

Remote work can also take a lot of time and effort. 

A big plus of working remotely is that you don't have to commute to and from the office every day.  This saves a lot of time.  Also, you won't have to follow a dress code by spending money on expensive suits and ties. 

However, work is work, you need to spend your energy and attention on it.  At the same time, the more people looking for work on the Internet, the higher the competition. 

And this means that employers will reduce wages and put forward increased requirements for the qualifications of workers.