When the IMF says that the worst is yet to come in 2023…

In search of strong emotions, what do you prefer: a horror movie or the IMF report? The Netflix catalog offers Scary Stories to Tell in the Dark, Fear Street and There’s Someone Inside Your House. The International Monetary Fund tells us “The worst is yet to come in 2023”. For next year, it projects that a third of the world’s countries will have negative growth and the three main global economies will cool down, the United States, China and the European Union.

For 2023, the world economy is projected to grow 2.7%, down from 3.2% in 2022 and well below 6% in 2021. If the bad omens come true, it would be the third worst year since 2001, only surpassed by 2009 (when the Great Depression began) and 2020 (the year of the pandemic).

The numbers for Mexico suggest that lean cows and inflationary balloons will continue: we will grow less than half the world average, 1.2% and much less than the 3% that the Treasury placed in the documents that it sent to Congress as part of the Economic Package for the 2023. Among the risks that Mexico could face next year are another wave of rises in food and oil prices, a greater-than-expected tightening of global financial conditions, and a severe slowdown in the US economy. The only positive surprise could come from the Nearshoring side.

The increase in the minimum wage for 2023 and 2024 is a risk factor that deserves the attention of the IMF team, in a document released on October 7. Minimum wages are now close to the average wage in the formal sector, says the document “(this) creates a risk of adverse effects on employment and an increase in informality. The large increases forecast for the next two years may add inflationary pressures at a time when it is key to return to low and stable levels of inflation.

The position of Mexico is not wonderful, but we can consider ourselves lucky to contemplate the world map. The economists of the financial organization launch alerts about the risks that developing countries run that have high levels of debt denominated in dollars. For these nations, which include Argentina, Bolivia, Honduras, Ghana and Sri Lanka, there is a very likely but undesirable scenario of deterioration in their fiscal and financial position as a result of interest rate hikes and the appreciation of the dollar. . On other occasions we have talked about the super peso, now it is worth dedicating a few lines to the level of Mexico’s indebtedness. The Mexican government has a reasonable level of debt relative to GDP, less than 60%, but the yellow/orange/red spots appear when the level of debt is compared to tax revenue.

Winter is coming and there is a risk of social instability, IMF Managing Director Kristalina Georgieva said in mid-September. Her words referred to a concrete reality, but they are also a metaphor where the reference to the television series Game of Thrones is clear. For European countries, the coming winter will be very hard due to high energy prices, associated with Russia’s invasion of Ukraine. Gas has multiplied its price by four compared to 2021. The electricity bill has risen up to 900 percent. European governments have put in place a whole range of unorthodox policies to reduce the risk of social unrest: direct subsidies to households, tax cuts and expropriation of companies.

Elsewhere, it’s not winter or energy prices, but rising food costs. Food poverty will grow and there is a risk of famine in Africa, Latin America and some less prosperous regions of Asia. The bad numbers in GDP and inflation are more than just statistics: fuel for social discontent. Have you seen Scary Stories to Tell in the Dark yet?

lmgonzalez@eleconomista.com.mx