The International Monetary Fund (IMF) will downgrade its projections for global growth in 2022 and 2023, announced its CEO Kristalina Georgieva during the hybrid meeting between finance ministers and central bank governors in the country group. Thieves (G20), July 16, 2022 in Bali (Indonesia).
” I wish the global economic outlook was as bright as the sky over Bali; Unfortunately, this is not the case. The situation has darkened considerably and the uncertainty is unusually high. The downside risks that the IMF had already warned against have come true.
The war in Ukraine has intensified and has put further pressure on commodity and food prices. The tightening of global financial conditions is more marked than expected. Finally, pandemic-related disruptions and new bottlenecks in global supply chains weigh on economic activity “, she said.
And to hammer: Therefore, later this month we will announce a further downgrade of our projections for global growth in 2022 and 2023 in the World Economic Outlook Update. In addition, downside risks will remain and may worsen, especially if inflation continues, which would require even greater policy interventions, which could have contagious effects on growth and exacerbate the effects of infection, especially in emerging and developing countries. Countries with high debt thresholds and limited political space will be exposed to further pressure. The situation in Sri Lanka, for example, is a wake-up call “.
The Directorate-General of the IMF specified that ” emerging and developing countries have recorded sustained capital flows for four consecutive months. They now risk seeing three decades of catching up with advanced countries being wiped out and even falling further behind. In this context, it recommends three actions:
” Firstly, countries must do everything they can to bring inflation down, otherwise the recovery could be jeopardized and the living standards of vulnerable people could be further reduced. The good news is that central banks have intervened. Monetary policy is increasingly in sync: More than three-quarters of central banks have raised interest rates, 3.8 times on average. Central bank independence is the key to the success of these measures, along with clear communication and a data-driven approach.
Second, fiscal policy should support, not hinder, central bankers’ efforts to control inflation. This is a complex task. In light of declining growth, some people will need more support, not less. Fiscal policy must therefore reduce debt, while providing targeted measures to support vulnerable households facing new shocks, especially due to rising energy or food prices.
Third, a renewed effort for global cooperation will be crucial in dealing with the many crises facing the planet. We need the management of the G20, in particular to address the risks associated with food insecurity and high debt levels. In this context, I am pleased that food security is a key theme at these meetings. Food insecurity means hunger for millions of people. Still, this is a problem that can be solved. Together with the leaders of the Food and Agriculture Organization (FAO), the World Bank, the World Food Program (WFP) and the World Trade Organization (WTO), the IMF calls on society to step up its efforts and work together to help people in need, lift export restrictions, promote food production and invest in climate-resilient agriculture. “.
In addition, Mrs Georgieva points out: “ Strong global leadership is also needed to tackle the plague of high debt, which has peaked in several years. More than 30% of emerging or developing countries are in or approaching a situation of excessive indebtedness. For low-income countries, this figure rises to 60%. Given the tightening of financial conditions and the depreciation of exchange rates, debt service is a very heavy, even unbearable, burden for some countries. “.
And to advise: In this context, it is important that the common framework of the G20 keeps its promises. It is encouraging to see the three creditors’ committees in Ethiopia, Chad and Zambia meet this week. We need to get results. The whole world is looking at us.
New rules and timetables should be established for the common framework. It is also important to extend coverage to countries that do not benefit from the Debt Service Suspension Initiative (ISSD). I urge the G20 to work together to define the way forward and act without delay. The debt situation is deteriorating rapidly and an effective debt restructuring mechanism needs to be established.
More generally, the G20 is the key to reviving collective efforts to achieve common global ambitions. These include advancing the reallocation of special drawing rights (SDRs) to amplify the impact of the IMF’s recent € 650 billion SDR allocation. “.
The official confirms that the time has come to turn the promises of the establishment of the new instrument, the Trust Fund for Resilience and Sustainability, with almost $ 40 billion in pledges, into effective contributions, so that this new trust fund is operational before the annual IMF meetings. and the World Bank in October.
” The urgency of supporting our vulnerable Member States in tackling long-term structural challenges, especially those related to climate change and pandemics, could not be greater. “, she explained.
For some time, the Tunisian authorities have been highlighting green indicators far from international reality, which has led Business News to question the reliability of the data presented. This IMF statement on the global situation proves once again that what is being presented is far from the international situation.
IN with press release