The international financial system is transferring from a world of relative predictability to considered one of higher uncertainty, IMF chief Kristalina Georgieva has mentioned, warning that international locations accounting for about one-third of the world financial system will expertise not less than two consecutive quarters of contraction this or subsequent yr.
In a significant coverage speech right here forward of the annual assembly of the International Monetary Fund (IMF) and the World Bank, IMF Managing Director Georgieva on Thursday mentioned the World Economic Outlook to be launched subsequent week would additional downgrade the worldwide development projections.
“We have downgraded our growth projections three times already, to only 3.2 per cent for 2022 and 2.9 per cent for 2023. And as you will see in our updated World Economic Outlook next week, we will downgrade growth for next year,” she mentioned.
“We will flag that the risks of recession are rising. We estimate that countries accounting for about one-third of the world economy will experience at least two consecutive quarters of contraction this or next year. And, even when growth is positive, it will feel like a recession because of shrinking real incomes and rising prices,” she mentioned.
“Overall, we expect a global output loss of about USD 4 trillion between now and 2026. This is the size of the German economy — a massive setback for the world economy. And it is more likely to get worse than to get better,” she mentioned.
Observing that uncertainty stays extraordinarily excessive within the context of struggle and pandemic, she mentioned there may very well be much more financial shocks. “Financial stability risks are growing: rapid and disorderly repricing of assets could be amplified by pre-existing vulnerabilities, including high sovereign debt and concerns over liquidity in key segments of the financial market,” she mentioned.
“We are experiencing a fundamental shift in the global economy: From a world of relative predictability — with a rules-based framework for international economic cooperation, low-interest rates, and low inflation… to a world with more fragility — greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating natural disasters — a world in which any country can be thrown off course more easily and more often,” Georgieva mentioned.
