Business & Economy

IMF to lower global growth outlook due to war in Ukraine

Washington, Mar 10 (EFE).- The International Monetary Fund (IMF) announced on Thursday that it will lower its global growth forecast for 2022 in April due to the Russian invasion of Ukraine, which is driving up inflation and leading to a contraction of global trade.

In a virtual press briefing, IMF Managing Director Kristalina Georgieva said that the reduction will be announced when the agency revises its growth forecasts next month, but did not give more details about how much the adjustment is expected to be.

Currently, the IMF’s global growth forecast for 2022 is 4.4 percent.

“We got through a crisis like no other with the pandemic, and we are now in an even more shocking territory. The unthinkable happened: we have a war in Europe,” Georgieva said.

She also suggested the possibility of Russia defaulting on its debt obligations due to the economic sanctions imposed by other countries and warned that the Russian economy is already contracting and heading into a deep recession.

“The Russian default is no more an improbable event,” she said.

According to the IMF official, the most important factor in determining the extent of Russia’s recession is “the duration of the war and the duration of the sanction regime on Russia. And whether or not this sanction regime may get even deeper with spillover on energy exports from Russia.”

Georgieva said that the IMF’s office in Moscow is no longer operational and that it has no program or police relations with Russia at the moment.

She also said that Russia had virtually no access to its allocation of SDRs — an international reserve asset created by the IMF to supplement the official reserves of its member countries — as their conversion into currency required the involvement of financial intermediations and financial institutions, which is “highly improbable” given the unprecedented sanctions regime on Russia.

When asked about the possibility of suspending Russia from the Fund due to its invasion of Ukraine, Georgieva said that the only way that could happen was if Russia violated the IMF’s Articles of Agreement economic obligations, which it has not done so far.

“Is the membership highly concerned about the war? Yes. When we had the discussions at our board of directors, it is very clear that the membership condemns the war. Beyond that condemnation, there have been no discussions at this point around Russia’s membership at the Fund. We are in a fast-evolving situation and we will see whether events in Ukraine take a turn for the better or not,” she said. EFE


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