The International Monetary Fund warns that a third of the world economy will be in recession this year

“We expect one-third of the global economy to be in recession,” Georgieva said on CBS’s “Face the Nation” news program.

“Even countries that aren’t in a recession, hundreds of millions of people will feel like they’re in a recession,” he added.

“The odds of a global recession over the next year are uncomfortably high. Europe will not escape recession and the US is teetering on the edge,” Katrina Ell, economist at Moody’s Analytics think tank in Sydney, told the BBC. , on his assessment of the global economy.

The International Monetary Fund cut its forecast for global economic growth in 2023 in October, due to the war in Ukraine and higher interest rates, as central banks around the world try to curb rising prices.

And then China abandoned its “zero Covid” policy and started reopening its economy, even as the coronavirus infection spread rapidly in the country.

Georgieva has warned that China, the world’s second-largest economy, will face a difficult start to 2023.

“The next two months will be difficult for China, the impact on Chinese growth will be negative, the impact on the region will be negative, and the impact on global growth will be negative,” he said.

The International Monetary Fund is an international organization of 190 member countries. They work together to stabilize the global economy. One of its main roles is to serve as an economic early warning system.

Georgieva’s comments will shock people around the world, not least in Asia, which has had a tough year in 2022.

Inflation has risen steadily across the region, largely due to the war in Ukraine, while high interest rates have also hit households and businesses.

Data released over the weekend point to weakness in the Chinese economy at the end of 2022.

The official Purchasing Managers’ Index (PMI) for December showed Chinese factory activity fell for the third consecutive month and at the fastest rate in nearly three years as coronavirus infections spread to factories across the country. country.

In the same month, home prices fell in 100 cities for the sixth consecutive month, according to a survey conducted by one of the country’s largest independent real estate research firms, the China Index Academy.

President Xi Jinping on Saturday, in his first public remarks since the policy change, called for greater engagement and unity as China entered what he called a “new phase”.

The downturn in the US also means there is lower demand for products made in China and other Asian countries, including Thailand and Vietnam.

Higher interest rates make loans more expensive, so for both reasons companies may choose not to invest in expanding their business.

A lack of growth can cause investors to withdraw money from the economy, so countries, especially poor ones, will have less money to pay for important imports like food and energy.

In such cases of economic slowdown, currencies can lose value against those of more prosperous economies, exacerbating the problem.

Rising interest rates on loans are also hitting government-level economies, especially emerging markets, which may struggle to pay down their debts.

For decades, the Asia-Pacific region has relied on China as an important trading partner and economic backstop in times of crisis.

Asian economies are now grappling with the lasting economic effects of China’s handling of the pandemic.

Production of products like Tesla electric cars and Apple’s iPhone could get back on track as Beijing suspends zero Covid.

But renewed demand for commodities like oil and iron ore is likely to push prices higher just as inflation appears to have peaked.

“China’s lax domestic Covid restrictions are not a quick fix. It will be a bumpy ride and a source of volatility throughout at least the March quarter,” Ill said.