THE International Monetary Fund (IMF) has confirmed fears of another global recession in 2023.
The IMF Managing Director, Kristalina Georgieva, raised this today in a chat with the World Bank president, David Malpass, during the commencement of the fund’s 2022 Annual meetings, holding in Washington D.C., USA.
Georgieva noted that, at least, two consecutive quarters of negative growth (a recession) would be experienced by one-third of the global economy, which could result in the loss of $4 trillion.
She said, “I very much agree with you (David Malpass) that the risks of recessions have gone up. We have calculated that about one-third of the world economy would have, at least, two consecutive quarters of negative growth this year to next year. The total amount that would be wiped out by the slowdown of the world economy between now and 2026 is $4 trillion. This is the size of Germany’s gross domestic product (GDP) gone.
“When we look at the picture, we are asking what are the drivers and what can be done. The drivers are the forces of disruption – the impact of COVID-19 on supply chains, the senseless war that is causing a push of prices up, especially energy and food prices, and major disruptions as a result of how economies function, and the inflation that is stubbornly high and necessitates tightening economic conditions that have gone faster than originally anticipated.”
She added, “When we look at the drivers, what are the consequences? We are seeing slowdowns in all three key economies of the world – Eurozone because of gas prices shooting up; China because of COVID-19 disruptions, and the volatility of the housing sector we see a very significant problem in China dragging down growth; and in the United States, still very strong labour markets, but also losing a bit of momentum because interest rates are starting to bite.”
The IMF chief said she had been advocating for action in the three areas of containing inflation, providing support and joining forces to help emerging economies stem the tide.
She noted that inflation had the tendency to affect poor people, and tightening it too much could lead to adverse conditions like a recession. Going further, Georgieva explained that support would be needed, especially in terms of monetary and fiscal policy. She stressed the importance of the central banks of different countries to work on these aspects, as they could fuel further inflation.
Finally, the IMF boss stressed the need for both the World Bank and the IMF to help developing countries, saying that beyond the fact that they had been hard hit by a looming global recession, the debt crisis from which they suffer could affect the whole world as a consequence of borrowing.
“Not a rosy picture but if we join forces and act together, we can reduce the pain ahead of us in 2023,” she reassured at the meeting, monitored by The ICIR via YouTube.