(Washington) No global recession, but growth that is running out of steam for a long time: the war in Ukraine has worsened inflation, jeopardizing the recovery in the world not only this year, but also in 2023, warned Thursday Kristalina Georgieva, the director General of the IMF.
Posted at 9:08
In January, even before Russia invaded Ukraine, the International Monetary Fund had already lowered its global growth forecast for this year to 4.4%, due to the Omicron variant. On the other hand, it had revised upwards its projections for next year.
The conflict in Ukraine has changed the game.
“To put it simply: we are facing a crisis on top of a crisis,” said Mr.me Georgieva in a speech ahead of the IMF and World Bank spring meetings.
The leader does not reveal the growth projections which will be published for each country next Tuesday.
It nevertheless indicates that “the economy of most countries will remain in positive territory”. In other words, IMF economists do not expect a recession at this time.
However, “the impact of the war in Ukraine will contribute to degrading this year the growth forecasts of 143 countries representing 86% of world GDP”, indicated Mr.me Georgiava.
Moreover, the situation varies greatly from one country to another. The economic projections for Ukraine are thus “catastrophic” and the forecast of contraction of the GDP of Russia is “severe”, warns the leader.
She also observes that the degree of uncertainty surrounding the latest IMF forecast goes well beyond the “usual” level as the war in Ukraine and sanctions could escalate even further while new virulent variants of COVID-19 are likely to emerge.
The risk is above all that high inflation sets in for a long time and is thus much more difficult to curb.
After a decade of near-silent inflation, prices around the world began to soar last year as the world’s population resumed heavy consumption 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 driven fuel and food prices skyrocketing.
Ukraine and Russia are major grain producers, and Russia is also a key energy source for Europe. The economic repercussions are therefore felt far beyond the Central and Eastern European region.
“Split”
Inflation, which has peaked in four decades in the United States, is “currently a real danger” for many countries and is hitting the poorest hardest, Georgieva lamented in this speech delivered at the Carnegie Endowment for International Peace in Washington. , a think tank, noting that the trend is likely to last longer than expected.
“It’s a massive drag on the global recovery,” she added.
It also significantly complicates the task of policymakers, because by raising interest rates, major central banks increase the borrowing costs of emerging and developing countries, which are heavily indebted.
“This is the most complex political environment of our time”, also opined Kristalina Georgieva, calling on the monetary institutions to “act decisively”.
Ending war and the pandemic are top priorities to ensure prosperity, the leader also stressed.
Finally, she warned of the “increasing fragmentation of the world economy into geopolitical blocs” which are detrimental to the ability to deal with current and future crises. This is to lead to a “tectonic shift” that would reshape global supply chains, for example.