OPINION
Market Rating Before FOMC MeetingJan 31
IMF - Global Economic Outlook is Darkening
Kristalina Georgieva, current managing director (MD) and Chair of the International Monetary Fund (IMF), said that the latest indicators indicate a weak second quarter, adding that further reductions in global economic growth forecasts for 2022 and 2023 are predicted.
The IMF has published the G20 Surveillance Notes just before the G20 Finance Ministers and Central Bank Governors meeting to be held in Bali on July 15-16.Recalling that the IMF in April lowered its forecast for global growth for this and next year to 3.6 percent and warned that this could worsen given the possible downside risks, Georgieva said: "Since then, several of those risks have materialized—and the multiple crises facing the world have intensified."
"Recent indicators imply a weak second quarter—and we will be projecting a further downgrade to global growth for both 2022 and 2023 in our World Economic Outlook Update later this month." Georgieva pointed out that the humanitarian tragedy is getting worse in the Russian-Ukrainian war, quoting that the war caused commodity price shocks, slowing growth and exacerbating the cost of living crisis.
Adding that inflation is higher than expected and has gone beyond food and energy prices, the Chair said that this has prompted major central banks to implement further monetary tightening, which is necessary, but will put pressure on the recovery. Georgieva noted that the ongoing pandemic in China and bottlenecks in global supply chains are also hampering economic activity.
"The outlook remains extremely uncertain"
According to the IMF Chair, it is going to be a tough 2022 and possibly an even tougher 2023, with increased risk of recession. Thus, decisive actions and strong international cooperation are needed under the leadership of the G20. Stressing that countries should do everything they can to reduce high inflation, Georgieva quoted that most central banks will have to continue to tighten monetary policy decisively.
She also stressed that fiscal policies should help central banks' efforts to reduce inflation and should not hinder these efforts. Adding that countries facing high debt levels will also need to tighten their fiscal policies, Georgieva further suggested that structural reforms are also important to support growth in the medium term.
The IMF has published the G20 Surveillance Notes just before the G20 Finance Ministers and Central Bank Governors meeting to be held in Bali on July 15-16.Recalling that the IMF in April lowered its forecast for global growth for this and next year to 3.6 percent and warned that this could worsen given the possible downside risks, Georgieva said: "Since then, several of those risks have materialized—and the multiple crises facing the world have intensified."
"Recent indicators imply a weak second quarter—and we will be projecting a further downgrade to global growth for both 2022 and 2023 in our World Economic Outlook Update later this month." Georgieva pointed out that the humanitarian tragedy is getting worse in the Russian-Ukrainian war, quoting that the war caused commodity price shocks, slowing growth and exacerbating the cost of living crisis.
Adding that inflation is higher than expected and has gone beyond food and energy prices, the Chair said that this has prompted major central banks to implement further monetary tightening, which is necessary, but will put pressure on the recovery. Georgieva noted that the ongoing pandemic in China and bottlenecks in global supply chains are also hampering economic activity.
"The outlook remains extremely uncertain"
According to the IMF Chair, it is going to be a tough 2022 and possibly an even tougher 2023, with increased risk of recession. Thus, decisive actions and strong international cooperation are needed under the leadership of the G20. Stressing that countries should do everything they can to reduce high inflation, Georgieva quoted that most central banks will have to continue to tighten monetary policy decisively.
She also stressed that fiscal policies should help central banks' efforts to reduce inflation and should not hinder these efforts. Adding that countries facing high debt levels will also need to tighten their fiscal policies, Georgieva further suggested that structural reforms are also important to support growth in the medium term.
