CERTAINLY, these are not the best of times for the global economy, thanks to the shocks of the COVID-19 pandemic, Russia’s invasion of Ukraine, and climate disasters.
But, what is to be done? Yesterday, Kristalina Georgieva, IMF Managing Director urged global leaders to urgently act together to make a difference in the lives of hundreds of millions of people.
“Act Now, Act Together” was her passionate plea as she welcomed delegates and participants to this year’s IMF/World Bank meetings, the Bretton Woods Institutions’ first in-person gathering since the Covid-19 pandemic.
Only through the collective effort of the global community that the myriads of problems besetting the world could be effectively tackled, Georgieva said.
For her, it is worrisome that these challenges — the COVID-19 pandemic, Russia’s invasion of Ukraine, and climate disasters — continue to harm people’s lives, having caused a cost-of-living crisis.
And the immediate toll is clear. The IMF cut its global growth forecast to 2.7 percent in 2023. “Across many economies, the risks of recession are rising. And even when growth is positive, for many people, it will feel like a recession because of rising prices and shrinking real incomes,” Georgieva said.
On top of this, risks to financial stability are growing and uncertainty remains exceptionally high. “Our World Economic Outlook shows a one-in-four chance that global growth could drop to a historic low of 2 percent next year. These repeated shocks and growth setbacks raise a bigger question: are we experiencing a fundamental economic shift in the world economy — from a world of relative predictability and stability, to greater uncertainty and volatility?” she asked.
What does this mean for policymakers? For Georgieva, it is a much more complex time, which requires steady hands at the policy levers. “The price of policy missteps, the price of poor communication of policy intentions, is very high. This week, we have an opportunity to work toward minimizing the risk of missteps,” she added.
The likely policy solutions available to policymakers? She admonished that efforts must be made to rein in inflation across the world.
What is more, Georgieva urged policymakers to act now to “prioritize protecting vulnerable households and businesses. But we have to do that at a time when fiscal buffers are exhausted because of the pandemic and levels of debt are very high.”
Cognisant the vulnerable emerging markets and developing countries are the worst hit by the prevailing economic challenges, the IMF boss called on multilateral institutions and developed societies to lend support to them. “It is tough for everybody, but it is even tougher for countries that are now being hit by a stronger dollar, high borrowing costs, and capital outflows—a triple blow that is particularly heavy for countries that are under a high level of debt. We are focusing on debt this week, especially for low-income countries where over 60% are at or near debt distress,” Georgieva said.