In a dialogue that kicks off the World Bank and International Monetary Fund (IMF)’s first face-to-face meeting since the pandemic, the heads of the two institutions discussed a series of compounding crises that threaten their livelihoods, including persistent inflation and rising risks. warned. global recession.
At the October 10 “drawing”, a week-long annual meeting between the two institutions took place in Washington, where World Bank President David Malpass and IMF Managing Director Kristalina Georgieva discussed the crisis and He called for concerted action in the face of the situation. It is said to be the “age of volatility”.
“There are risks and real dangers of a global recession next year,” Malpass said, opening the discussion. He cited slowing economic growth in developed countries and depreciating currencies in many developing countries.
Debt levels are becoming more burdensome as developing world currencies depreciate, Malpass said, adding: “Inflation is still a big problem for everyone, but especially for the poor.” I was.
Malpass said poverty levels had spiked around the world, noting that median income had fallen by a “very worrying” 4%.
World Bank update poverty report estimates that about 70 million people will be pushed into extreme poverty in 2020. This is the biggest one-year increase since the agency began tracking prosperity levels in 1990.
Malpass spoke of a “reversal” of development as more and more capital flows from developing countries to developing countries. Compounding this are problems related to food, energy and fertilizer shortages.
“This is a huge number of problems,” he said, adding that one of his core desires is to see more resources flow to developing countries.
Georgieva supported the view that the risk of recession has increased. By the end of next year, she predicts, about a third of the global economy will see negative growth for at least her second quarter in a row. This is the general rule-of-thumb definition of a recession.
“The total amount wiped out by the global economic slowdown will be $4 trillion between now and 2026,” she said. “This is the size of Germany’s GDP. It’s gone.”
It is the “forces of chaos” that are driving this economic wipeout, she said, addressing issues such as the impact of COVID-19 on supply chains and the impact of the war in Ukraine on food and energy prices. I mentioned.
“Inflation is stubbornly high,” she continued. The situation has led to a more aggressive tightening of financial conditions than she had previously expected.
Georgieva noted a slowdown in economic activity in all three major economies. In China, housing volatility and her COVID-19 lockdown are holding back growth. In the US, rate hikes are “starting to make an impact.”
The IMF secretary-general has advocated action to curb inflation, which she called a “dramatic tax”, especially on the poor.
She said it was unacceptable for inflation to become a “runaway train” while warning of the risk of excessive tightening by central banks.
She said it was reasonable for the government to adopt some fiscal measures to help people weather the current and imminent crisis, but “otherwise it would add fuel to the inflationary flames.” “Because of that,” he called for any support to be targeted.
Georgieva also called on countries to “manage the great and terrible danger of the debt crisis.” This is because it affects all countries, not just those with high debt burdens.
“It’s not a rosy picture,” she said. “But if we work together and act collectively, we can alleviate the pain we face in 2023.”