World Bank Group President David Malpass and International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned Monday in Washington of the high risk of a global recession amid a slowing economy. economic activity and the combined effects of rising inflation and the consequences of the war in Ukraine.
Speaking in a conversation under the theme “Facing multiple crises in a volatile environment,” at the opening of the annual assemblies of the two international institutions, Georgieva, underlined the importance of these assemblies, which are being held for the first time face-to-face for three years, adding that over the past three years, “we have experienced unthinkable events with appalling consequences”.
She thus noted that the risk of recession has greatly increased, adding that a third of the world’s economies will experience at least two consecutive quarters of contraction this year and the following year.
Ms Georgieva, who warned of the consequences of the slowdown in the global economy, said the total amount that will be wiped out by this slowdown in the global economy by 2026 would be $4 trillion – or the equivalent of Germany’s GDP – which will go up in smoke.
This slowdown is the result of the effects of Covid-19 on supply chains, the war in Ukraine which is driving up the prices of basic commodities, including foodstuffs, and high and stubborn inflation, he said. she explains.
The Managing Director of the IMF noted the slowdown of the three major world economic powers. First in the euro zone, because of the explosion in gas prices, in China, because of the disruption caused by the pandemic and the instability of the real estate sector, and finally in the United States, which, despite the a very dynamic labor market, see its economic activities run out of steam due to the rise in interest rates, she explained.
“We are witnessing a profound shift from a fairly predictable world, with low inflation and low interest rates, to a more unstable and fragile world with consequences that we must face this week in Washington,” said the head of the IMF.
“The situation is difficult for everyone and especially for developing countries,” she added.
For his part, Malpass noted that many economies are seeing their activities slow down. This is particularly the case in Europe, noted the head of the World Bank, who does not rule out a risk of recession from next year.
Currency depreciation is another big problem, he said, adding that this means that the debt levels of developing countries are becoming heavy.
Rising interest rates and inflation are difficult especially for developing countries, added Malpass, who recalled that millions of people are falling into poverty.
Developed countries absorb most of the capital, which further complicates the situation for poor countries, said the head of the World Bank, who also noted other problems, including those related to education and energy. , shortage of fertilizers and poorer harvests.
Regarding the recommendations, the head of the World Bank Group considered it necessary that more resources be directed to developing countries, adding that it would also be necessary to increase production and growth, “first by the advanced countries who have more leeway.
The head of the World Bank Group also highlighted the need to help countries adopt better policies, with less subsidies to higher income brackets and more support and inclusive finance for women and men. small enterprises.
He recommends “a country-by-country, case-by-case approach to have very effective programs”.
“We also need to move quickly to create fiscal space for the climate issues that are happening in many developing countries,” he added.
For his part, the Managing Director of the IMF stressed the importance of controlling inflation, supporting households in a precise and targeted manner and balancing monetary and budgetary policy.
“It’s regarding succeeding on two fronts: stabilizing the economy and transforming it for the future,” she said.
The two officials also underlined the importance of allocating more resources to tackle the food crisis and ensuring more funding for emerging and developing countries to deal with climate change and mitigate its effects.
“These meetings provide an opportunity to think regarding ways to work together to carry out the necessary reforms and redirect private financing to address climate change,” she stressed in this regard.
Other actors must also participate in efforts to help developing countries cope with climate change, launched Malpass, who considers it necessary to alleviate the debt of the poorest countries facing the devastating effects of climate change.
“These meetings are an unprecedented opportunity to cooperate and demonstrate that together we can design policies that work,” concluded the Managing Director of the IMF.
Held from October 10-16, the IMF-WB Meetings provide a platform for policymakers, central bank governors, financial experts, economists, parliamentarians and NGOs to debate a wide range of pressing issues ranging from inclusive growth and energy and education, among others.
