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- BBC News World
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The chief economist of the IMF, Pierre-Olivier Gourinchas, warned that a third of the economies might fall into recession.
“The worst is yet to come and for many people 2023 will feel like a recession,” the chief economist of the International Monetary Fund (IMF), Pierre-Olivier Gourinchas, warned on Tuesday.
Acknowledging that “storm clouds are gathering,” the agency announced its global economic projections without much room for optimism given the current international situation.
For this year, it estimates world economic growth of 3.2% and for the following year of only 2.7%.
Although some countries are having it worse than others, At least a third of the world’s economies are at risk of slipping into recession next year, the IMF noted.
The Russian invasion of Ukraine, which continues to “powerfully destabilize” the world economy and has led Europe into a “severe energy crisis”, as well as the spiraling inflation around the world and the slowdown in the Chinese economy, are for the IMF the factors that are marking world economic evolution and will continue to do so in the near future.
While the United States would grow 1% next year, the euro zone would barely grow 0.5%, making it clear that if the most advanced economies are going to face a rocky road, so will those countries with lower incomes.
The Asian giant is also in trouble
On the other hand, China, one of the biggest engines of international trade, is not having a good time either.
Its “covid zero” policy, which has involved continuous confinements and closure of commercial activities, has taken its toll on the largest Asian economy, which is also facing a crisis in the real estate market, lower global demand for its products and a very weak yuan. once morest the dollar.
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3,2%Global growth in 2022
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2,7%Global growth in 2023
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3,5%Growth of Latin America in 2022
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1,7%Growth of Latin America in 2023
Source: IMF
If China stops abruptly, it drags many countries with it that have the Asian giant among their first commercial partners. The IMF expects growth of 3.2% this year and 4.4% next year.
And it is that the slowdown in China has become one of the factors that most affects the world economic direction, especially due to the serious problems that it is producing in the supply chains.
Something that, highlights the organization, will continue “weighing heavily on global trade and activity.”
What happens in Latin America?
A severe economic slowdown is also approaching in Latin America, according to the IMF’s World Economic Outlook report, reaffirming the downward trend that would mark the path of a large part of the economies.
This year the region would grow 3.5% and just 1.7% in 2023, in the midst of very high inflation, a rapid increase in interest rates that seeks to mitigate the increase in prices, weakened currencies once morest the dollar and capital flows migrating to safer lands in search of higher profitability.
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While the increase in the price of some raw materials in international markets has given various Latin American economies a break – acting as a “cushion” to cushion the crisis – it has also increased the cost of other imported products.
The problem is that if things have been difficult so far, with levels of inflation not seen in decades and with the wounds left by the pandemic still exposed, the future outlook seems to be very challenging.
The region’s growth is expected to slow in late 2022 and into 2023 as partner country growth weakens, financial conditions tighten and commodity prices soften.
And he adds that the cost of living will continue to climb. For this year it forecasts an average inflation of 14.1% and 11.4% for the next.
Amidst this scenario, global growth remains fragile.
So fragile, that if the 2020 economic crisis due to the covid-19 pandemic is excluded, next year’s performance would be the weakest since 2009, when the “great financial crisis” caused a kind of economic earthquake.
With the uncertainty generated by the war in Ukraine – increasing food and energy prices that were already high following the coronavirus outbreak – and rising interest rates, the impact of the economic slowdown shows no sign of abating anytime soon.
image source, Getty Images
“This year’s shocks will reopen economic wounds that were only partially healed following the pandemic,” Gourinchas added.
Rising price pressures are the most immediate threatpointed out the economist, which has prompted central banks to raise interest rates.
For this year, the IMF forecasts inflation in advanced economies of 7.2%, and 9.9% for emerging ones.
The agency’s warning comes as central bankers and public finance chiefs meet in Washington for the annual IMF and World Bank forums.
One of the central issues will be the monetary policy being applied by the United States Federal Reserve (Fed), equivalent to the central bank of other countries.
The Fed has embarked on a historic rise in interest rates with the aim of lowering an inflationary spiral that in June reached 9.1%, the highest in 40 years in that country, and is currently at 8.3%. .
The debate will revolve around how much more the agency should continue to raise interest rates, without causing an economic recession in the United States and without damaging too much the rest of the countries that see how the dollar rises without stopping.
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