January 13, 2023
Baghdad / Obelisk: The Director-General of the International Monetary Fund, Kristalina Georgieva, expressed her concern regarding the state of the economy, explaining that the year 2023 may witness social tension at the global level, while the impact of tightening financial policies on employment has not yet appeared.
“We are only on January 12th and we already have (models) in Brazil, Peru, Bolivia, Colombia and the UK, all for different reasons but with very clear social tensions,” Georgieva said.
And if higher interest rates will eventually affect labor markets which is a logical consequence of the slowdown target, that might lead to additional tensions, she said.
And she added that the situation will not improve soon because of “inflation, which is still solid” and in confronting it, “the work of central banks has not ended yet,” stressing that “the crisis is most likely not over yet.”
Georgieva said that the economic slowdown is supposed to be greater in 2023 than what the fund expected in its last publications last October, but that the national labor markets “proved resistance,” considering that a “positive point.”
She added that this was mainly due to “governments moving quickly to provide financial support to the population in the face of high food and energy prices. But the available space is shrinking.
And Georgieva believed that “as long as people have jobs, even if prices are high, they consume, which helped the economy in the third quarter, especially in the states and in Europe, but we realize that the effect of tightening fiscal policies has not yet occurred.”
At the same time, the impact of raising interest rates on debtor countries will be severe, as indicated by Georgieva, whose foundation has been warning for months of the danger of turning regarding 60 percent of emerging and developing countries into countries suffering from sovereign debt crises.
– Inevitable global recession –
“For highly indebted countries whose issues are denominated in dollars, the effects (monetary policies) will be significant,” Georgieva said. And when added to this is the devaluation of the currency in the countries concerned, this leads to great hardships for the population.”
And I took the opportunity to remind you of the need to quickly restructure the debts of these countries, which is a topic “on which we are supposed to hold a meeting in February at the highest level, with the main creditors China, India and Saudi Arabia, as well as the private sector.” Nevertheless, the International Monetary Fund still considers that “a global recession can be avoided” even if a number of countries experience a decline in GDP, at least “if there is no additional shock,” according to Georgieva.
This is especially in the event that China does not change its current policy towards the epidemic, while an economic recovery in the country, starting in the middle of the year, will be “the main engine of global growth for the year 2023.”
And she stressed that “if they continue on their path, China will once once more become a positive contributor to global growth, even if it does not reach the rates recorded so far.”
On the other hand, the director of the International Monetary Fund believed that the ability of the US economy to resist makes it possible to avoid a decline at the global level.
“What we are seeing in the United States is remarkable,” she said, noting low unemployment rates and continued consumption. “We’re also seeing a shift in spending from goods to services,” which is supporting the activity, she said.
This, she added, “makes it conceivable that the United States may escape a recession. And in the event that they suffer a technical recession, it should remain light.”
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