IMF chief urges action to ward off global recession risk

WASHINGTON: International Monetary Fund (IMF) chief Kristalina Georgieva Thursday, urged global policymakers to take concerted actions to avoid a “dangerous’ new normal, as the risk of a worldwide recession grows higher due to economic shocks.” repeated economic shocks.
In a speech ahead of the fund’s annual meeting next week, the IMF chief executive said it was important to “stabilize the global economy by addressing the most immediate challenges” – including rampant inflation.
Policymakers need to act together to “prevent this period of heightened fragility from becoming a dangerous ‘new normal'”. Georgieva speak.
But she warned the process would be difficult – and if central banks moved too aggressively to relieve price pressure, it could trigger a “prolonged” recession.
Finance ministers and central bank governors from more than 180 countries will gather next week in Washington for the first face-to-face meeting between the International Monetary Fund and the World Bank since 2019, ahead of the global summit. Covid-19 pandemic.
Faced with a “dark global outlook … recession risks are growing,” Georgieva said – announcing that the crisis lender plans to once again downgrade its 2023 forecast for the economy world, in forecasts to be published next week for the annual meeting.
She said a third of countries will see at least two-quarters of a contraction and “even if growth is positive, it will look like a recession” as rising prices erode incomes, she said.
In July, the fund cut its growth forecast for this year to 3.2% and for next year to 2.9% – the third consecutive downgrade.
Shock, after shock
The meetings come at a difficult time for the global economy, with the pandemic mostly under control, but soaring inflation and rising interest rates now threaten to reverberate globally and choke breathes in the early stages of recovery.
Georgieva said in her speech during the speech at Georgetown University.
Struggling global supply has been a challenge for the world economy as demand soars in the wake of the pandemic downturn, fueling inflation around the world and worsening after the pandemic. Russia’s invasion of Ukraine – which Georgieva called a “pointless war” – sent food and food prices skyrocketed.
“It’s not just temporary, inflation has become more persistent,” and acting before high prices become fixed is a key challenge for policymakers, Georgieva said. The cost of a policy mistake can be enormous.
“Not tightening enough will cause inflation to become depressed and entrenched, but moving” too much and too quickly – and doing so synchronously across countries – can push many economies apart, she said. economy into a prolonged recession,” she said.
Despite the risks, central banks need to continue to “act decisively.”
“This isn’t easy, and it won’t be painless for the foreseeable future,” she warns. “But it’s crucial to avoid greater and more lasting pain for everyone later on.”
– Debt difficulties – Georgieva stressed the need for fiscal policies to help the most vulnerable sections of society, but warned that efforts must be targeted “focusing on lower-income households”, to avoid acting contrary to prevailing monetary policy. .
She cautions against relying on price controls that are neither affordable nor effective.
The pandemic forced many countries to borrow more, and many countries are currently facing or at risk of falling into poverty amid rising interest rates. That “increases the risk of a growing debt crisis”, which could further harm global growth.
To reduce risk, “major creditors like China and private-sector creditors have a responsibility to act,” she said, calling for “faster and more predictable” action on restructuring. debt structure.


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