Inflation, war in Ukraine and recurring lockdowns in China will melt global growth in 2023.
“In short, the worst is yet to come and many people will feel like they are in a recession in 2023.” In one shocking sentence, the latest report from the International Monetary Fund expresses all the concern of the organization which watches over the global economy.
Since April, the global economic outlook has deteriorated “significantly deteriorated, and the economic downturn intensified”, indicates the document published Tuesday, at the opening of the assemblies of the IMF and the World Bank, in Washington. The global economy, which was gradually recovering from the effects of the pandemic and continued to face logistical problems in many sectors, is facing an unusual chain of shocks. Which makes plane “stormy clouds” on the global economy.
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Jamie Dimon, the influential boss of the JPMorgan bank, shares this vision, a little more supported. There are very, very serious reasons that are likely to push the United States and the world – Europe is already in recession – into some kind of recession within six to nine months,” he estimated Monday on CNBC.
Inflationary pressure is “stronger than expected” especially in developing countries. It triggered a rapid tightening of monetary policies, accompanied by a violent rise in interest rates, “alongside a strong appreciation of the US dollar”, details the IMF.
These actions will affect the economy by weighing on demand and will eventually reduce the rise in prices gradually. Global inflation, averaging 8.8% this year, peaking at 9.5% in the third quarter, will begin to decline from the end of 2022. However, it will remain high for longer than expected and will not fall back to 4, 1% than in 2024, worries the Fund.
The institution also fears that the central banks are calibrating their reactions badly. “Tightening monetary policies too much, but also not tightening them enough, could make inflation more anchored. History reminds us, this can only make the fight against inflation even more expensive,” warns Pierre-Olivier Gourinchas, chief economist of the IMF.
The world economy is also suffering from the repetitive confinements practiced by China as part of its “zero Covid” policy. They slow down “worse than expected” of the world’s second largest economy, which is also suffering from the weaknesses of its real estate sector.
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Added to this are the heavy economic consequences of the war in Ukraine. This one “has led to a severe energy crisis in Europe, which is sharply increasing the cost of living and hampering business. The price of gas in Europe has multiplied more than four times since 2021. And this is not a temporary shock”, emphasizes Pierre-Olivier Gourinchas. who recalls that “The conflict has also pushed up food prices on world markets.”
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In this context, if it does not modify its growth estimates established in July for the year 2022, the IMF is revising its forecasts for 2023 downwards by 0.2%. % at best next year. The probability that its growth will fall below 2%, or even drop to 1%, is far from negligible, fears Pierre-Olivier Gourinchas.
Slowdown for a third of the world economy
This is all the more worrying as, “Even if GDP continues to grow, many households around the world will feel like they are in recession, due to the rising cost of living,” IMF Managing Director Kristalina Georgieva explained last week.
Everything seems set, moreover, for a third of the world economy to record two consecutive quarters of GDP decline next year, which will technically be similar to a recession.
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For 2023 as a whole, the three largest economies, the United States, European Union and China, will continue to stagnate. The Fund sees two major European countries, Germany and Italy, in recession. He is also more optimistic for the UK than other observers who, like the financial rating agency Fitch, see it in recession in 2023.
As for Russia, for which the IMF announced in July a drop in GDP of 3.5%, it should suffer a contraction limited to -2.3% in 2023, thanks to the resistance of its oil exports and its demand. internal.
But even if this is not reflected in their growth rates, which are holding up, it is the least developed countries that are expected to suffer the most. They suffer from the strength of the dollar, which fuels inflation and capital flight, insists the IMF.