The year 2023 might be a year marked by social tensions at the global level, worried Thursday the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, while the effect of the financial tightening on employment “is yet to come”.
“It is only January 12 and we already have (illustrations) in Brazil, Peru, Bolivia, Colombia, the United Kingdom, all for different reasons but with very clear social tensions,” Ms Georgieva recalled. . However, if the rise in rates were to end up having an effect on the job markets, a logical consequence of the objective of slowing down, this might result in additional tensions, warned the boss of the international institution.
Especially since the situation is not regarding to improve, due to “inflation which remains tenacious” and in the face of which “the work of the central banks is not yet finished”, recalled Mrs Georgieva, implying at the same time that “the crisis is probably not over”. This is mainly due to “the fact that governments have acted quickly to provide financial support to populations in the face of rising food and energy prices. But the available space is shrinking”.
Dramatic impact
“As long as people have work, even if prices are high, they consume, which helped the economy in the third quarter, particularly in the United States and Europe, but we know that the impact of the tightening is to come” in terms of unemployment, insisted the boss of the IMF.
At the same time, the impact of the rise in rates on indebted countries will also be dramatic, recalled Ms. Georgieva, whose institution has been warning for several months of the risk of seeing around 60% of emerging and developing countries switch to a sovereign debt crisis.
“For countries with a high level of indebtedness and whose issues are denominated in dollars, the effects (of monetary policies, editor’s note) are dramatic. And when a devaluation is added in the countries concerned, this leads to significant difficulties for the populations”, detailed the managing director of the IMF.
Restructure debt
The opportunity to recall the need to quickly restructure the debt of these countries, a subject on which “we must have a meeting in February at the highest level, with the main creditors, China, India, Saudi Arabia, as well as the private sector” .Nevertheless, the IMF still believes that “a global recession can be avoided” even if a number of countries should see a decline in their GDP, at least “if there is no additional shock”, has reminded the general manager.
Especially in the event that China does not question its change of policy vis-à-vis the pandemic, when an economic recovery in the country from the middle of the year “might be the most major global growth driver for 2023,” Ms. Georgieva added.
No recession in the United States
“If they stay on their trajectory, China will once more become a positive contributor to global growth, even if it will no longer be in the proportions observed so far,” she insisted. On the other hand, the resilience of the American economy makes it possible to avoid a plunge at the global level, noted the boss of the IMF.
“What we are seeing in the United States is quite remarkable”, she added, pointing to particularly low unemployment and consumption which remains sustained, “we are also seeing a shift in spending from goods to services”, which supports activity. “It makes it possible to envisage the fact that the United States should be able to avoid the recession. And in the event that they do experience a technical recession, it should remain light”.
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