IMF chief warns of ‘hurdles’ for world economy this year

The head of the International Monetary Fund said the global economy will have to hit a “road of obstacles” this year as the ongoing pandemic and geopolitical tensions exacerbate global inflation problems.

Kristalina Georgieva, speaking at the virtual World Economic Forum on Friday, rather than a normal in-person gathering in Davos, warned that the outlook for the global economy this year will be far from smooth.

“[The year] 2022 is like navigating an obstacle course,” said the fund’s managing director. “We expect [global] The recovery will continue, but it is losing some steam and faces an update [Covid-19] Infect. . . more persistent than expected inflation, and. . . record high debt levels. ”

Given the growing tensions between Russia and Ukraine, Georgieva said many of the reasons for inflation cannot simply be explained by spending and demand levels that are too high compared to global supply capacity.

The head of the International Monetary Fund commented that inflation is not just a problem that central banks can fix, adding: “Price pressure comes from soaring food prices. [caused] partly because [the] climate. . . and energy prices soaring, it’s a very complicated story, and there’s also an element of geopolitical tension.”

Georgieva said the Fed had “acted responsibly” in tightening monetary policy, and at a time when “inflation in the U.S. is turning into an economic and social problem” while responding to rising prices and protecting the economic recovery. strike a balance.

However, U.S. rate hikes will hit some countries, especially those with higher levels of dollar-denominated debt, which “could throw cold water on an already sluggish recovery in some countries.”

Georgieva urged them to act quickly. “If you have currency mismatches, now is the time to fix them,” she said.

Noting a slowdown in China, Georgieva said it was a concern for the rest of the world in 2022 and that Beijing should consider easing policy to encourage growth, as well as its zero coronavirus, given the more contagious variant of Omicron Whether policy is still the best option.

“What Omicron is telling us all is that it’s a highly transmissible variant of Covid that can be more difficult to contain without a huge economic impact, and our view is that that has to be taken into account,” she said.

“We’re going to see how China integrates this information, both in terms of the policies they apply, and in terms of how they’re moving forward with the most effective vaccines and how they’re going to integrate it. [into] China’s [policies to control infections]. “

The International Monetary Fund will release its latest forecast for the global economy next Tuesday.

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