IMF, World Bank chiefs: Risk of global recession has risen
Washington DC, Oct 10 (EFE).- The managing director of the International Monetary Fund warned here Monday that the risk of a global recession has risen, saying the world has entered a period of fragility and volatility.
“We have calculated that about one-third equivalent of the world economy would have at least two consecutive quarters of negative growth this year (or) next year, and that the total amount that would be wiped out by the slowdown of the world economy is going to be, between now and 2026, $4 trillion. This is the size of Germany’s GDP gone,” Kristalina Georgieva said.
She made her remarks during a conversation with World Bank Group President David Malpass at the outset of the week-long 2022 Annual Meetings of the Boards of Governors of the World Bank Group and the IMF, which are taking place in person once again after being held in virtual and hybrid formats the past two years due to the pandemic.
Georgieva said a series of shocks to the global economy have occurred over the past three years, citing the Covid-19 pandemic, Russia’s invasion of Ukraine and climate disasters spanning the globe.
“All of this has driven people into a very difficult place. They’re exhausted and they have to cope with a cost-of-living crisis,” the IMF managing director said, adding that the situation is particularly difficult for those in developing countries.
“What we see perhaps is a fundamental shift from the world of the last decades that was relatively predictable – with strong, rules-based international order, low inflation, low interest rates – to a world that is more volatile, more fragile, and with consequences that we have to wrestle with, grapple with” during this week’s meetings.
Malpass, who also pointed to a risk of global recession in 2023, said the depreciation of global currencies relative to the dollar means that debt levels for the developing countries “are getting more and more burdensome.”
He added that rising interest rates are further aggravating the situation even as inflation is a major problem for everyone, “but especially for the poor.”
With an additional 70 million people globally having fallen below the poverty line and median incomes having decreased by 4 percent, according to figures from the World Bank’s latest poverty report, Malpass said the goal of shared prosperity is “not happening.”
“There’s reversals going on in development. I call it a ‘crisis facing development,'” the World Bank president said. “One of the things is the advanced economies are taking a lot of the world’s capital. That comes in the form of the fiscal deficits, the heavy borrowing by big corporations and the central banks themselves buying only the bonds of the very advanced countries.”
“And so that puts a strain on development from the macro side. And then of course from the individual side we see the problems of education and energy, shortages of fertilizer and food crops. So it’s a vast array of problems … One of our core desires is to see more resources flowing into the developing world.”
Georgieva, for her part, said the IMF is advocating for actions in three areas: containing inflation; providing well-targeted fiscal support that do not fuel further price hikes; and joining forces with the World Bank to assist developing economies hard hit by the tightening of financial conditions and help avert a debt crisis with far-reaching consequences.
She added, however, that the climate issue looms large over the other problems.
“It is bad to have inflation, but we will survive as humanity. It’s very bad to have recessions. It would affect people horribly, especially poor people. But we can survive it as humanity,” the IMF managing director said.
“We cannot survive an unabated climate crisis, so mobilizing today for a more resilient tomorrow is exactly what we should do.” EFE
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