IMF projects further downgrade to global growth

The International Monetary Fund is projecting a further downgrade to global growth for both 2022 and 2023 in its World Economic Outlook Update later this month.

Managing Director, Kristalina Georgieva, is therefore urging G20 Leadership to address ‘exceptionally uncertain’ global outlook.

“I wish the global economic outlook was as bright as the sky in Bali, but unfortunately, it is not. The outlook has darkened significantly, and uncertainty is exceptionally high. Downside risks about which the IMF had previously warned have now materialized”, she stressed

The war in Ukraine has intensified, exerting added pressures on commodity and food prices. Global financial conditions are tightening more than previously anticipated. And continuing pandemic-related disruptions and renewed bottlenecks in global supply chains are weighing on economic activity.

Kristalina Georgieva said, downside risks will remain and could deepen—especially if inflation is more persistent—requiring even stronger policy interventions which could potentially impact growth and exacerbate spillovers particularly to emerging and developing countries.

“Countries with high debt levels and limited policy space will face additional strains. Look no further than Sri Lanka as a warning sign”, she added.

Countries must do everything in their power to bring inflation down

The IMF Boss charged countries to do everything in their power to bring inflation down. Failure to do so, she said, could risk the recovery and further damage living standards for vulnerable people.

“The good news is that central banks are stepping up. Monetary policy is increasingly synchronised: more than three-quarters of central banks have raised interest rates and have done so 3.8 times. Central bank independence is critical for the success of these policy actions, as is clear communication and a data-driven approach”.

Secondly, she said fiscal policy must help – not hinder – central bank efforts to tame inflation, adding, “This is a complex task. With growth slowing down, some people will need more support, not less. So fiscal policy needs to reduce debt while providing targeted measures to support vulnerable households facing renewed shocks, especially from high energy or food prices”.

Thirdly, Kritalina Georgieva, said a fresh impetus for global cooperation will be critical to confront the multiple crises the world is facing.

“We need G20 leadership particularly to address the risks from food insecurity and high debt. Here, I welcome the focus on food security issues during these meetings. Food insecurity means hunger for millions of people. Yet it is a solvable problem. Together with heads of the UNFAO, World Bank, WFP and WTO, the IMF is calling on the international community to step up and work together to support those in immediate need, remove export restrictions, promote food production, and invest in climate-resilient agriculture.