Washington, Oct 13 (EFE).- Pointing to “exceptionally high” uncertainty in the global economy, the managing director of the International Monetary Fund (IMF) said here Thursday that the situation “requires steady hands on the policy levers.”
Kristalina Georgieva began the press conference by celebrating the return to an in-person format for the IMF’s annual meeting after two years when the gathering was entirely virtual due to the Covid-19 pandemic.
She quickly shifted gears, however, to acknowledge the cumulative negative impact of the pandemic, Russia’s invasion of Ukraine, climate disasters and soaring inflation.
“You saw on Tuesday the IMF cutting our growth forecast for 2023 to 2.7 percent. Across many economies, recession risks are rising. And even when growth remains positive, for hundreds of millions of people, it would feel like a recession because of rising prices and shrinking incomes,” the Bulgarian economist said.
Georgieva noted that the IMF now sees a one-in-four chance that growth worldwide could decline to a “historic low” of 2 percent in 2023.
“These repeated shocks we have experienced, the growth setbacks, they raise a bigger question. Are we experiencing a fundamental shift in the world economy from relative predictability and stability to greater uncertainty and volatility?,” she continued.
The director said the IMF views this week’s meeting as an opportunity to persuade policymakers in the institution’s 190 member-nations of the need “to act with a sense of urgency now and to act together.”
She listed bringing inflation under control as the top priority, even if the goal is achieved “at some cost to growth.”
The second priority, according to Georgieva, is to “ensure that fiscal and monetary policy go hand in hand” by requiring government support to struggling households and businesses to be both well-targeted and temporary.
At the global level, she stressed the necessity to “support vulnerable emerging markets and developing countries.”
In that context, Georgieva cited the roughly $260 billion the IMF has provided to 93 countries since the start of the pandemic and the nearly $90 billion extended to 18 other countries hurt by the economic consequences of the war between Russia and Ukraine – two of the world’s largest agricultural exporters.
“And we now have additional 28 requests for support from the Fund,” she said.
When a reporter asked whether the aggressive monetary tightening by the United States Federal Reserve and other central banks could lead to an economic slowdown, the IMF chief said that the probability of recession has increased.
“As I mentioned in my opening, we think that the risk of global recession is now 25 percent, so it is not negligible, but we still have in our hands instruments that can navigate through. It is a narrow path, but the path is there. It is like climbing a mountain. If we hold hands, we follow each other’s steps, we actually can get there. We can avoid a global recession,” Georgieva said. EFE /dr