The Facts
One-third of the global economy will be in recession this year, International Monetary Fund (IMF) chief Kristalina Georgieva said Sunday, warning of a "tough year” as the three largest economies — the US, the EU, and China — are showing slower growth rates.
Georgieva's warning comes amid the Ukraine war, rising inflation, and higher interest rates. The IMF chief warned that China, the world's second-largest economy, and Asia are facing a difficult start to 2023 after Beijing abandoned its "zero-Covid" policy and began reopening its economy.
The Spin
Narrative A
A deep, protracted recession will manifest thanks to Putin’s invasion of Ukraine, soaring food and energy costs, a catastrophic debt crisis in the developing countries, sky-rocketing inflation, and visible cracks in longstanding geopolitical certainties. Policy actions that could deter the inevitable would worsen inflation — setting the stage for an even worse downturn. While no one can predict how severe and how long it may last, the next 12 months are likely to be difficult.
Narrative B
Despite many grim forecasts, a crippling global recession can be avoided with the right fiscal policies. While 2023 may be tougher than 2022 for the global economy, the upcoming slump does not qualify as a recession. Despite the slow growth rate, many economies have handled the economic pressures better than anyone thought possible six months ago. Positive growth among developing economies may outweigh advanced economies' negative growth, enabling the world to thwart the downturn's effects.
