According to the head of the International Monetary Fund (IMF), Kristalina Georgieva, this year is likely to be more challenging for the economy all over the world than the year that has just finished. While this news is alarming for the traditional markets, it is also concerning for the crypto market.
While it is possible that a recession will be avoided in the United States, the situation appears to be direr in Europe, which has been severely impacted by the conflict in Ukraine. In addition, Georgieva predicted that almost half of the European Union will be experiencing a recession.
Georgieva said in an interview for CBS News, “Why? Because the three big economies, US, EU, China, are all slowing down simultaneously. We expect one-third of the world economy to be in recession,” she said, adding that even for countries that are not in recession: “It would feel like a recession for hundreds of millions of people.”
The IMF forecasts that global economic expansion would decelerate to 2.7% this year, down from 3.2% in 2022. According to Georgieva, the slowdown of the major economies will have a significant and detrimental impact on emerging economies. The slowdown spreads across the globe, becoming a widespread pattern that brings the global market to its knees.
The Economic Crisis in China
The slowdown in China will have a devastating effect on the rest of the world as both the traditional and crypto markets will be impacted. The tight implementation of a zero-Covid policy in 2022 caused China to fall out of pace with the rest of the globe, causing supply chains to break down and causing damage to the flow of commerce and investment. As a result, the world’s second-largest economy experienced a catastrophic decline.
This past weekend, Chinese President Xi Jinping stated that he anticipated the country’s economy to have grown by at least 4.4% in the previous year. This figure is significantly higher than what many economists had predicted, but it is significantly lower than the 8.4% growth rate that was witnessed in 2021.
Georgieva said, “For the first time in 40 years China’s growth in 2022 is likely to be at or below global growth. Before Covid, China would deliver 34, 35, and 40% of global growth. It is not doing it anymore. It is quite a stressful period for Asian economies.”
Beijing lifted restrictions on COVID at the beginning of December. The reopening of COVID may bring some much-needed respite to the global economy; nevertheless, the recovery is going to be unpredictable and harsh. As a result of China’s hasty reopening, a surge of COVID cases has been triggered, which has caused the healthcare system to become overburdened, which in turn has reduced both supply and demand.
The Global Recession and Crypto Market
More than one-third of the world’s economies will be impacted by what the IMF refers to as a global recession, and there is a 25% chance that the world’s GDP would grow by less than 2% in 2023. During the interview, Georgieva reviewed the three major economies and gave contrasting images of how well they are able to weather the storm of the current economic crisis.
According to the statistics for the manufacturing purchasing manager index that were made public on Monday, low values were observed in Europe, Turkey, and South Korea. Data set to be made public on Tuesday is anticipated to reveal similarly discouraging results for the countries of Malaysia, Taiwan, Vietnam, the United Kingdom, Canada, and the United States.
On the other hand, the outlook for the crypto market may offer some comfort. The cryptocurrency market will be subject to the repercussions of the slowdown that will occur in the global economy. But the economic downturn will compel investors to seek alternative investment opportunities or take their money out of the market. Nevertheless, crypto investors may still consider Bitcoin investment as a hedge against the ongoing global recession.
