Kristalina Georgieva IMF Managing Director

International Monetary Fund (IMF) Managing Director Kristalina Georgieva recently spoke at the World Government Summit in Dubai, where she expressed optimism about the state of the global economy.

Despite a year of recession predictions from economists, billionaire investors, and CEOs, Georgieva stated that the markets have a “good reason to be more upbeat” as the U.S. economy is likely to avoid recession. She credits this positive outlook to a combination of resilient U.S. and European labor markets, China’s economic reopening after a string of COVID-related lockdowns, and fading inflation.

‘Surprisingly good results’

The IMF chief also stated that Chinese consumers are “rushing to spend” the money they saved during the extended lockdowns imposed under Beijing’s strict COVID-zero policy. This, coupled with the central banks’ combined interest rate hikes, has had “surprisingly good results” in taming runaway consumer price increases. Georgieva added that inflation, which was the stock market’s worst enemy in 2022, is finally slowing, but her economic outlook is still “less bad, but not good.” She predicted that monetary tightening will continue until 2024.

IMF economists expect global economic growth, as measured by Gross Domestic Product (GDP), will slow from 3.4% in 2022 to 2.9% in 2023, due to the weight of higher interest rates.

In the U.S., they are forecasting a drop from 2% GDP growth in 2022 to 1.4% this year and just 1% in 2024. Despite this, the IMF has noted that the “balance of risks remains tilted to the downside” for the global economy, but risks have also “moderated” in recent months.

Expected recovery

At the World Economic Forum’s annual conference in Davos, Switzerland, in January, Georgieva stated that she expects economic growth to begin recovering by the second half of 2024.

This shift in tone from the IMF is a stark contrast to what Georgieva and the IMF’s leading economists told reporters last year. Throughout 2022, the international lending agency repeatedly slashed its global economic growth forecasts. Pierre-Olivier Gourinchas, the IMF’s director of research, warned in an April blog post that growth was fading and we “may soon be teetering on the edge of a global recession.”

In October, Georgieva, who served as CEO of the World Bank before starting her current position at the IMF, argued that the pandemic, the Ukraine war, and a series of climate disasters were combining to create a “darkening global outlook.”

She stated, “In less than three years we lived through shock, after shock, after shock. Our world economy is like a ship in choppy waters.”

As late as December, Georgieva made the case that the global economy was facing “a tough year, tougher than the year we leave behind.” She told CBS’s Face the Nation in an interview published on January 1,

“We expect one-third of the world economy to be in recession. Why? Because the three big economies—U.S., EU, China—are all slowing down simultaneously.”

However, despite the pessimistic outlook last year, the global economy has shown signs of resilience in the face of the ongoing pandemic and its related economic challenges.

The U.S. labor market has remained robust, with a consistent decline in unemployment rates over the past year. Additionally, the economic reopening in China has given the country a boost, with consumers rushing to spend the money they saved during the lockdowns.

By Blair McPherson

Blair McPherson is a highly regarded economist and journalist with a deep understanding of the economic landscape.He holds a degree in Economics and International Trade from Edinburgh University, where he developed his expertise in macroeconomic policy, financial markets, and international trade.Known for his clear and insightful analysis, Blair has written extensively on a range of topics, and is a sought after speaker and expert commentator. He is committed to promoting economic literacy and helping people understand the impact of economics on their lives.