The IMF’s lowest growth forecast in 33 years
Expressing that they expect the global economy to grow less than 3 percent this year, International Monetary Fund (IMF) President Kristalina Georgieva said that they predict global economic growth to remain around 3 percent in the next 5 years, and this is the lowest middle. long-term growth forecast since 1990. .
Georgieva delivered a speech titled “Road to Growth: Three Priorities for Action” at the event she attended ahead of the IMF and World Bank Spring Meetings.
Stating that after the strong recovery of the world economy in 2021, growth fell by almost half in 2022 from 6.1 percent to 3.4 percent due to the war started by Russia in Ukraine, Georgieva said that the slowdown also continued this year.
THERE ARE BIG DIFFERENCES BETWEEN COUNTRY GROUPS
“We expect the global economy to grow less than 3 percent this year, despite surprisingly resilient labor markets and consumer spending in most advanced economies, and the recovery sparked by the reopening of China,” Georgieva said. .
Noting that growth remains weak compared to historical comparison in both the short and medium term, as can be seen in the World Economic Outlook Report to be announced next week, Georgieva said there are also stark differences between the country groups.
ECONOMIC ACTIVITY DECREASES IN THE US AND THE EURO REGION
Kristalina Georgieva said there is some momentum coming from emerging economies, noting that India and China are expected to account for half of global growth in 2023.
Noting that economic activity has slowed in the US and the euro zone due to high interest rates suppressing demand, Georgieva said: “About 90 percent of advanced economies are expected to experience a decline in their growth rates this year.
Stating that borrowing costs for low-income countries have risen at a time when demand for their exports has weakened, Georgieva emphasized that per capita income gains have lagged behind those of emerging economies, a blow that has made it difficult to low-income countries to catch up with others. .
Georgieva warned that poverty and hunger could rise further as a dangerous trend started by the Covid-19 crisis.
It is expected to remain around 3 percent in 5 years.
IMF Managing Director Georgieva said sound and coordinated monetary and fiscal policy measures have prevented much worse outcomes in recent years, but a strong recovery is difficult with geopolitical tensions rising and inflation still high.
Georgieva said: “We estimate that global growth will remain around 3 percent over the next 5 years; “Our lowest medium-term growth forecast since 1990 and well below the 3.8 percent average of the past 20 years.”
A CALL TO STRONG POLITICAL ACTION
Calling for strong political action to ensure a strong recovery, Georgieva said there are three big “hills” to climb.
Stating that the first of these is to fight inflation and protect financial stability, Georgieva emphasized that strong growth cannot be achieved without price stability and financial stability.
Noting that core inflation remains stubbornly high, partly due to tight labor markets in many countries, despite the rapid and synchronized increase in interest rates by central banks, Georgieva also said that the fight against inflation it has become more complex with recent pressures from the banking sector. in the US and Switzerland, and that the long term she Said that she reminds us how difficult it is to quickly go from the period of low interest rates and abundant liquidity to much higher interest rates and scarce liquidity.
‘WE HOPE THEY PROTECT THEIR ROUTES TO FIGHT INFLATION’
Kristalina Georgieva said risk management failures have emerged at certain banks, as well as supervision deficiencies, but the banking sector has come a long way since the 2008 global financial crisis.
Stating that banks are generally stronger and more resilient, and that policy makers have acted swiftly and thoroughly in their actions in recent weeks, Georgieva said:
“Concerns continue to exist about vulnerabilities that may be hidden not only in banks but also in non-bank institutions; Now is not the time to be complacent. As long as financial pressures remain limited, we expect central banks to stay their course in the fight against inflation by taking a tough stance to avoid anchoring in inflation expectations.”
‘GREEN STEP CHANGE’
Pointing out that the second step to climb is “to improve growth prospects in the medium term”, Georgieva pointed out that it is necessary to improve the business environment, increase productivity and growth potential by increasing human capital and participation, through reforms structures and accelerating the digital revolution
Georgieva also stressed the need for a “green shift” to protect the planet and create new economic opportunities.
Stating that roughly $1 trillion a year is required for renewable energy alone, Georgieva said this will benefit the growth and jobs business.
Georgieva stated that a radical change in international cooperation is necessary, especially to reduce the effect of economic disintegration and geopolitical tension with the war launched by Russia in Ukraine.
Georgieva also stressed that solidarity must be promoted to reduce global inequalities. (AA)