Global economic growth is slowing down. That was already clear in the run-up to the traditional spring meeting of the International Monetary Fund (IMF) and the World Bank in Washington, which opened on Monday. In 2023, the growth will be less than 3 percent, said IMF boss Kristalina Georgieva last week at an event of the news portal “Politico”. The global economy weakened significantly last year. After the post-corona economic boom pushed growth to more than 6 percent in 2021, it collapsed by almost half to 3.4 percent in 2022. A recovery was not really expected. Today, Tuesday, the IMF is presenting its new detailed forecasts for the world’s most important countries and regions in the US capital.
Lowest medium-term forecast since 1990
According to Georgieva, growth will remain weak not only in the short but also in the medium term: “We forecast that global growth will remain at around 3 percent over the next five years – our lowest medium-term forecast since 1990.” The average over the past two decades was 3.8 percent. According to the head of the IMF, more digitization, more investments in renewable energies, more structural reforms and more cooperation on the international stage are now key instead of geopolitical tensions.
Around 90 percent of the industrialized countries are likely to record lower growth rates this year, explained Georgieva. But poorer countries are also weakening and are finding it difficult to close the gap. “Poverty and hunger might increase further – a dangerous trend that started in the Covid crisis.”
According to the IMF, the central banks, which are currently raising interest rates more than they have been in decades, have an important role to play because of the persistently high inflation. The US Federal Reserve recently – despite the turbulence surrounding some large regional banks – raised the key rate by a quarter of a percentage point to the new range of 4.75 to 5.0 percent, while the European Central Bank (ECB) raised the key rate by 0.5 percentage points to now 3.5 percent.
More resilient banks since the 2008 financial crisis
According to the head of the IMF, the trend will continue. At the same time, however, the central banks would also have to pay attention to financial stability, which recently came to the fore once more due to the collapse of several banks. Liquidity injections might be good medicine here. In general, banks have become more resilient since the 2008 financial crisis.
According to Georgieva, since the outbreak of the corona pandemic, the IMF has provided almost 300 billion euros in financial assistance to 96 countries in need. Recently there were new aid packages for Sri Lanka and Ukraine. It is now important to deal with the debts of poorer countries in particular, she warned. There must be more concessions from the creditors here.
The annual IMF-World Bank Spring Meetings bring together finance ministers, central bankers, officials, and finance and development experts from around the world. The finance ministers and heads of the central banks of the 20 most important industrialized and emerging countries (G20) will meet on Wednesday. Also on the agenda of the spring conference is a round table on Ukraine. The Ukrainian President Volodymyr Zelenskyj is also expected to be involved. The IMF has just approved a billion-dollar loan program for the country attacked by Russia. He specifically changed his rules to allow such programs for countries facing “extraordinarily high levels of insecurity.”(red.)
