A third of the world is expected to go into a recession this year amid the ongoing war in Ukraine and a slowdown in major economies, the International Monetary Fund (IMF) warned on Sunday, though economists told Doha News Qatar’s economy will likely continue to expand.
Speaking to CBS, the IMF’s Managing Director Kristalina Georgieva offered a bleak view of the new year, warning that it will be “tougher than the year we leave behind.”
“We expect one-third of the world economy to be in recession,” Georgieva told CBS’s ‘Face the Nation’.
Explaining this year’s economic forecast, the IMF official said the reason behind the prediction is due to the simultaneous slowdown of the world’s three big economies – the United States, the European Union and China.
“When we look at the emerging markets in developing economies, there, the picture is even direr,” she said.
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Georgieva noted that Washington “may avoid recession” due to its strong labour market, with unemployment standing at 3.7% and 263,000 jobs added in November alone, the Financial Times reported.
On the other hand, the EU is still grappling with the ramifications of the Russian war on Ukraine.
“Half of the EU will be in recession next year,” she said.
Meanwhile, China is currently struggling with another alarming Covid-19 wave following its reversal of the “Covid Zero” policy, with the IMF saying it is likely to face a“tough year.”
According to Bloomberg, the U-turn on the policy led to China’s slowest economic activity in December since February 2020—the early days of the Covid-19 outbreak.
“For the next couple of months, it would 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,” said the IMF official.
In October, the financial agency predicted that there was a 25% chance that the global gross domestic product (GDP) will grow by less than 2% this year.
Qatar’s 2023 economic forecasts
However, economists believe Qatar’s economy will continue to expand “at a healthy pace” despite a potentially slow GDP growth.
“Qatar’s economy will continue to expand at a healthy pace, although real GDP growth will slow from about 5.5% in 2022 to about 3.7% in 2023,” Adnane Allouaji, GCC economist, told Doha News.
The Gulf state’s economy has witnessed major growth over the past year in light of the large demand for liquified natural gas (LNG) – a consequence of the war on Ukraine. The demand for Qatari gas coupled with the hosting of the 2022 FIFA World Cup reflected positively on the Gulf state’s economy.
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Allouaji explained that Qatar benefitted last year from the hydrocarbons sector activity, most notably the LNG trade and investment.
“Ongoing major investment in energy infrastructure will continue to drive the economy in 2023, including increased capital investment by QatarEnergy (the state-owned oil and gas company), Qatargas, and Nakilat,” the economist said.
Over the year, Qatar has taken centre stage in energy talks as Europe scrambled to secure its gas supply in an effort to abandon its reliance on Moscow.
The region previously received 40% of its gas supplies from Moscow as almost a third of shipments passed through Ukraine.
“Qatar will embark on an intense period of negotiations with international LNG clients in 2023 with the aim of securing long-term fixed contracts for its existing and future expanded LNG production,” Allouaji said.
In November, Germany signed a 15-year LNG agreement with Qatar, with flows expected to kick start in 2026. Hungary, among the countries that heavily rely on Russian oil and gas, later announced that talks would take place with Qatar over LNG supply.
Qatar holds long-term contracts with Asian buyers, which mainly include China, India, Japan and South Korea.
“Qatar’s buoyant energy sector has allowed the country to rebuild its economic and financial buffers and these will remain vast in 2023. Qatar has been able to generate fiscal and current-account surpluses in 2021 and 2022, and both balances will remain solidly in surplus during 2023,” Allouaji noted.