The head of the International Monetary Fund (IMF) predicts Thailand and Southeast Asian countries will suffer from recession this year along with the rest of the world.
The 69 year old Bulgarian economist reckons 2023 will be “tougher” than last year as the United States, European Union, and China witness a slowdown of their economies.
The prediction is a result of the effect of the Russia-Ukraine conflict, rising prices, higher interest rates and the spread of Covid-19 in China weighing on the global economy.
“We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like a recession for hundreds of millions of people.”
Georgieva’s doom-laden prediction is supported by Katrina Ell, an economist at Moody’s Analytics in Sydney, Australia.
“While our baseline avoids a global recession over the next year, odds of one are uncomfortably high. Europe, however, will not escape recession and the US is teetering on the verge.”
Georgieva predicts a struggle for China at the beginning of this year.
“For the next couple of months, it will be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative.”
Some 190 countries are members of the IMF which act as a kind of economic alarm clock for its members.
Thailand may have climbed off its sick bed, and opened the curtains on a new post-Covid dawn but Georgieva believes the Land of Smiles is not quite ready to take a dip in the pool, just yet.
Inflation has been steadily rising across Southeast Asia largely because of the conflict between Russia and Ukraine. Furthermore, higher interest rates have also hit households and businesses.
That’s not all. Stats released over the weekend highlighted a weakness in the Chinese economy at the end of last year.
China’s factory activity shrank for the third month in a row reported the official purchasing managers’ index for December, and at the fastest rate in almost three years as coronavirus infections decimated the mainland’s factories.
A survey by China Index Academy, one of the country’s largest independent property research firms, revealed that home prices in 100 cities fell for the sixth month in a row
The downturn in the US also means there is less demand for the products that are made in Southeast Asian countries such as Thailand and Vietnam.
The US buys a number of products from Thailand including machines, rubber, and farm produce.
Higher interest rates also make borrowing more expensive and, because of this, a number of companies may not expand their businesses.
The lack of growth can trigger investors to pull money out of the economy and, as a consequence, poorer countries will have less cash to pay for crucial imports like food and energy.
Currencies lose value in these kinds of slowdowns, compounding the issue.
The impact of higher interest rates on loans affects economies at the government level too – especially emerging markets, which may struggle to repay their debts.
In the past, the Asia-Pacific region has depended on China as a major trading partner for economic support in times of crisis.
Now Asian economies are facing the lasting economic effects of how China has handled the pandemic.