The International Monetary Fund (IMF) does not foresee a world recession but lowers its growth forecasts for 2022 and 2023 due to the war in ukraine and its effect on inflationannounced this Thursday the general director of the institution, worried about a “fragmentation” of the world.
In January, even before Russia would invade Ukrainethe FMI had already lowered its global growth forecast for this year to 4.4%, due to the Omicron variant of Covid-19but revised upwards its projections for next year.
The war in Ukraine shattered these predictions.
Unleashed on February 24 with the Russian invasion of Ukrainethe war has aggravated inflation, which “currently represents a real danger” to the global economic recoverystressed Kristalina Georgieva.
“In short: we are facing a crisis on top of another crisis,” he lamented in a speech ahead of the spring meetings of the IMF and the world Bank.
“It’s obvious, but the root cause of what we are currently facing is war,” he insisted.
Georgieva has not revealed the growth projections for each country, which will be published next Tuesday.
But he indicated that “the economy of most countries will remain on positive ground.” In other words, IMF economists do not anticipate a recession at this time.
However, “the impact of war in ukraine This year, it will contribute to downgrading the growth forecasts of 143 countries that represent 86% of world GDP,” Georgieva said.
The situation varies greatly from country to country. The economic projections for Ukraine are “catastrophic” and the forecast for a contraction of the Russia GDP it is “severe”, he warns.
He also stressed that the degree of uncertainty in the latest IMF forecast goes far beyond the “usual”, because the war in Ukraine and the sanctions against Moscow could worsen and new ones are likely to emerge. variants of Covid-19.
The main risk is that inflation remains high for a long time and is therefore much more difficult to control.
After a decade of almost silent inflation, prices around the world began to skyrocket last year as consumption by the world’s population soared after the economic paralysis caused by the covid-19 pandemic in 2020.
In recent weeks, the Russian invasion of Ukraine and the sanctions imposed on Moscow have triggered the fuel prices and of food.
Ukraine and Russia are major grain producers, with the latter also a key energy source for Europe. Therefore, the economic repercussions are felt beyond the Central and Eastern European region.
Inflation, which has broken a record in four decades in USAis “currently a real danger” for many countries and hits the poorest hardest, Georgieva lamented in a speech at the Carnegie Endowment for International Peace, a Washington think tank. He believes that this trend will probably continue for longer than expected.
“It’s a big drag on the global recovery,” he added.
It also considerably complicates decision-making because if interest rates are raised in order to curb the price boom, the main central banks will increase the borrowing costs of emerging and developing countries, which are already heavily indebted.
“This is the most complex political environment of our time,” said Georgieva, who called on monetary institutions to “act decisively.”
Ending the war and the pandemic are top priorities to ensure prosperity, he added.
The director of the IMF also warned about the “increasing fragmentation of the World economy into geopolitical blocs” that undermines the ability to deal with current and future crises.
This will lead to a “change” that would reshape, for example, global supply chains.
The war in ukraine has raised “legitimate questions” about how the countries can continue to work together, he said.
But “the answer cannot be isolation and fragmentation,” he concluded.
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