The IMF's chief emphasises a "fundamental shift" in the global economy

The IMF's chief emphasises a "fundamental shift" in the global economy

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), stated that there is a "fundamental shift" in the global economy, encouraging countries to reduce inflation, implement responsible fiscal policy, and cooperatively support emerging market and developing economies. The global economy is transitioning "from a world of relative predictability, with a rules-based framework for international economic cooperation, low interest rates, and low inflation… to a world of greater fragility, greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating natural disasters," Georgieva said in a prelude speech to the IMF and World Bank's 2022 Annual Meetings, which begin next week.

She emphasised the importance of economic stabilisation, noting that the global outlook has been clouded by many shocks, including a war, and that inflation has become more persistent, according to the Xinhua news agency. The IMF has already reduced its growth estimates three times since October last year, to only 3.2% for 2022 and 2.9% for 2023, according to the IMF president, who also stated that the global institution will reduce growth for next year in its updated World Economic Outlook next week.

"We will warn that the risks of a recession are increasing," she said. According to the IMF, countries representing around one-third of the global economy will endure at least two consecutive quarters of contraction this or next year. "Moreover, even if growth is favourable, it will seem like a recession due to declining real earnings and rising prices," she noted. The IMF predicts a $4 trillion global output loss between now and 2026. This is the size of the German economy, which represents a significant setback for the global economy.

The IMF head urged policymakers to continue on track to reduce inflation and implement responsible fiscal policy that protects the weak while not adding fuel to inflation, while also asking for coordinated measures to strengthen emerging market and developing economies. "A stronger dollar, high borrowing costs, and capital outflows cause a triple blow to many emerging markets and developing economies," Georgieva explained, noting that the probability of portfolio outflows from emerging markets over the next three quarters has risen to 40%, posing a "major challenge" to countries with large external financing needs.

More than a quarter of emerging economies have defaulted or had debts trading at distressed levels, and more than 60% of low-income nations are in, or are at high risk of, debt distress. The IMF director asked governments to collaborate to address concerns such as food insecurity, which currently affects 345 million people, and climate change, which poses an existential threat to civilization. Since the outbreak of the pandemic, the IMF has granted $258 billion to 93 countries. It has provided almost to $90 billion in assistance to 16 countries since the Ukraine-Russia war, in addition to last year's historic $650 billion Special Drawing Rights grant.

(source : IANS)

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