World is progressing towards recession, IMF says

Kristalina Georgieva, the head of the International Monetary Fund has said that the year 2023 is going to be tough in terms of economic growth. This is especially because larger economies such as the US, China, and the EU have shown slowed economic growth in the past few months. There have been many events that have led to this slowed economic growth globally. This includes the Russia-Ukraine war which has disrupted the supply of oil and gas across Europe and many Asian countries. Along with this, rising interest rates and the surge of COVID cases in China have also significantly contributed to the recession in several industries across the world. Kristalina Georgieva said that based on the data and global economic growth outlook report from the IMF, a third of the world is expected to be in recession this year. She further added that, even if any particular country is not in a recession, it would feel like a recession for millions of people. 

2022 has been a rough year for the global economy and many countries which were already struggling due to the COVID-19 pandemic. 

As the year started, it was believed that now that the world will finally have a chance to repair the damage done by the pandemic to industries, supply chains, and the finance sector. But in February 2022, Russia started a war against Ukraine for acquiring the land which was once ruled by the Russian Federation. Because of these actions of Russia, western countries and their allies applied sanctions on Russia, which disrupted the oil and gas industry in Europe. Many European countries are now struggling to get their supplies of fossil fuels, which has also impacted other industries which rely on fossil fuels for operation. This has massively affected the value of the Euro and Pound in Europe and the UK, respectively. European countries are hence forced to look for other suppliers of fossil fuels such as the US and Middle Eastern countries. 

China, which is considered the manufacturing hub of the world, had issued some stringent regulatory guidelines under its Zero-COVID policy, which it even continued in 2022. Many smartphones and other technology companies have their manufacturing plants set in China. But because of China’s Zero-COVID policy, these tech companies have struggled with keeping their production output to that of pre-COVID values. A good example of this occurred in October 2022, when Foxconn, the largest manufacturer of Apple’s iPhone, reported a COVID outbreak. The fear of an outbreak due to China’s stringent regulations was so severe that the workers at Foxconn decided to flee to get out of the factory. This resulted in further worker protests on the grounds of unhealthy and unfair working conditions. Currently, China is under a severe COVID-19 outbreak as the number of new cases per day is significantly high in the country. This has alarmed economists across the world as the manufacturing sector in China is expected to take a major hit during this outbreak. Based on these events, IMF’s warning is seeming possible to come true.