World economy heading for recession in 2023, IMF says

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Global economy heading for recession in 2023, IMF says

Exterior view of the building of the International Monetary Fund (IMF).

The world economy, shaken by repeated shocks for a year, is recession, which is likely to affect several advanced countries in 2023, warned the International Monetary Fund (IMF) on Tuesday on the occasion of the publication of its autumn report on the country. economy.

Admittedly, the IMF maintained its growth forecast for 2022 at 3.2%, already revised three times this year, but it lowered that expected for 2023 again, this time to 2.7%, or 0.2 percentage point. less than the previous review in July.

With the exception of the 2008 financial crisis and the acute phase of the pandemic, this is the weakest growth expected since 2001 and it reflects the slowdown of the main economies, the United States, Europe and China, for different reasons, specifies the institution.

Because the global economy, which was slowly recovering from the effects of the pandemic and continued to face logistical problems in many sectors, is now facing an unusual chain of shocks.

This year's shocks will reinforce the consequences of the pandemic that were only partially recovered. In summary, the worst is yet to come and for many people 2023 will look like a recession, IMF chief economist Pierre-Olivier Gourinchas said in a statement.

International Monetary Fund (IMF) Chief Economist Pierre-Olivier Gourinchas speaks during a press conference at the World Bank Annual Meeting and the IMF at IMF Headquarters in Washington, DC on October 11, 2022.

At the center of the difficulties, persistent inflation affecting advanced economies, but even more so, emerging and developing countries, and which should reach 8.8% on average worldwide this year (+0 .5 points compared to the July forecast).

On a positive note, however: global inflation is expected to have peaked in the third quarter (9.5%) and start to decline from the last quarter of 2022, continuing this trend next year, to return in the last quarter. 2023 at a level comparable to inflation in 2021 (4.7%).

The economic slowdown will, however, affect all of the wealthiest states, with start with the United States: growth there has been revised to just 1.6% in 2022, against 2.3% expected in July. 2023 could be even tougher, with the Fund expecting just 1%.

And the situation is not much better in the euro zone: admittedly, growth should reach 3.1% in 2022, better than expected in July (+0.5 points), but the zone should come close to the recession in 2023, at 0.5% growth (-0.7 points compared to July forecasts).

And for some Member States, Germany and Italy, recession looks inevitable next year (-0.3% and -0.2% respectively), while France can hope to stay above the waterline, with growth of 0.7%. Just like, outside the EU, the United Kingdom, at 0.3%.

China, the world's second largest economy, should for its part experience in 2022 its worst year for more than 40 years, if we exclude the pandemic in 2020, with an expected growth of just 3.2%, before recovering slightly in 2023 (4.4%).

Like rich countries, the year 2023 is likely to be very difficult for the American economy.

In question, the repeated confinements caused by the zero tolerance policy vis-à-vis COVID-19 which have affected several cities in the country, starting with its economic center , Shanghai, closed for over a month.

Russia, whose economy is bearing the brunt of the sanctions put in place by the United States and the European Union in particular, will experience a recession this year, but the situation should be less marked than expected. in early summer.

The IMF now expects a contraction of 3.4% there for 2022, but this is 2.6 points better than the forecast made last July. Russia, however, is expected to be the only economy in the G20, which meets in Washington on Wednesday, to experience recession this year.

In a gloomy global context, the Latin America and the Caribbean region is seeing its forecasts improve, with growth now expected at 3.5% (+0.5 points) this year, even if its two main economies , Brazil and Mexico, will have less marked growth than the average for the region.

The future remains nevertheless uncertain, underlines the Fund, which acknowledges that its forecasts, in particular for 2023, are only valid if inflation expectations remain stable and monetary tightening does not lead to a generalized recession or a disorderly adjustment of financial markets.

Especially since the effect of 2022 will be felt in the long term. In a speech on Thursday, IMF Managing Director Kristalina Georgieva pointed out that by 2026 this will represent a $4 trillion loss to the global economy, the size of the German economy.

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