January 2, 2023—International Monetary Fund Managing Director Kristalina Georgieva said the majority of the world should brace itself for an economic slowdown in 2023.
In an interview with CBS on Sunday, Georgieva predicted that half the European Union would see recession this year while China’s economy is likely to continue to slow down. She said the United States might avoid a negative growth if its labor market remains strong, but that is a “mixed blessing” because it means the Federal Reserve would likely continue raising interest rates.
Georgieva, the head of the agency tasked with helping countries avoid economic crisis, said 2023 is likely to be “a tough year, tougher than the year we leave behind.”
That outlook differs from trends at the end of 2022 when a majority of G20 countries experienced an increase of 1.3 percent quarter-on-quarter, according to the OECD.
Countries With High Debts Hit The Hardest
Inflation is expected to slow a bit, from 7 percent to 6 percent, she said. Inflation has been a source of uncertainty in the past year even as it impacts countries differently.
However, a majority of the world could see negative growth. Developing countries with large debts to finance are likely to experience the worst economic conditions.
“When we look at the emerging markets in developing economies, there, the picture is even direr,” Georgieva said. “Why? Because on top of everything else, they get hit by high interest rates and by the appreciation of the dollar. For those economies that have high level of that, this is a devastation.”
Countries with the highest debt levels, according to the CBS interview, are Chad, Ethiopia, Zambia, Ghana, Lebanon, Surinam, Sri Lanka. At this point in time, Georgieva doesn’t not see a risk of a debt crisis for the global economy as a whole. However, that outlook could change. If more countries face debt problems, “then the world economy may be for a bad surprise,” she said.
