IMF calls on China to reopen economy

WASHINGTON (AP/RTR/BLOOMBERG) – The International Monetary Fund urges China to reopen its economy. The Washington-based financial institution said the country’s transition from a zero-covid policy to more normal operations will be the most important driver of global growth this year.

“The most important thing is that China is on track and not shying away from reopening,” said IMF General Manager Kristalina Georgieva, who visited China last month for the first time since the pandemic began. “If they stay on track, China will make a positive contribution to average global growth in the middle of the year,” Georgieva said, calling China’s performance in 2022 “very disappointing.”

The IMF believes it can avoid a global recession this year. The fund does not expect a major downward revision to its 2.7 percent growth forecast for the global economy this year, with new projections to be released later this month. According to Georgieva, global growth will bottom out by the end of the year, and growth rates will pick up again next year.

Depression

There are also growing signs that the US can avoid recession this year, according to the IMF director. And even if there is a contraction in the U.S., he says it will be “very mild.” In October, the IMF forecast 1 percent growth in the world’s largest economy in 2023, an update this month.

According to the IMF, US labor markets remain resilient and consumer demand remains strong despite interest rate hikes to combat inflation. However, according to Georgieva, the full impact of the central bank rate hike on employment is yet to materialize. “As long as people are working, even if prices are high, consumers are spending. But we all know, in terms of unemployment, that the impact of higher interest rates has yet to come.”

Stubborn

According to Georgieva, inflation remains “stubborn” and central banks’ job of controlling inflation is not yet done, he says. This suggests that central banks will continue to raise interest rates to bring inflation back to the 2 percent target.