IMF's Director: The U.S. may avoid recession in 2023

Shafaq News/ International Monetary Fund Managing Director Kristalina Georgieva said countries have yet to see the full impact of tightening financial conditions.

Georgieva pointed out that global growth is expected to slow further in 2023 as central banks, including the U.S. Federal Reserve, have raised interest rates to cool surging prices.

While sectors like housing have been reeling in the United States, for example, the American labor markets remain "resilient, and consumer demand remains strong" despite increased interest rates to fight inflation.

"As long as people are employed, even if prices are high, consumers spend... But we all know that the impact of tightening financial conditions is yet to bite in terms of unemployment," Georgieva told reporters in a briefing on the world economy.

"Inflation remains stubborn, and in that sense, the job of central banks is not yet done," she said.

This suggests central banks may need to continue hiking interest rates, walking a fine line between easing demand and avoiding tipping economies into recession.

Georgieva stressed the need to watch how tightening conditions hit the labor market and possibly translate into "more tensions between employers and workers."

Governments have been quick to provide policy support thus far, adding a buffer between consumers and surging food and energy costs, but this policy space is "shrinking," she cautioned.