“We are facing a crisis on top of another crisis,” International Monetary Fund (IMF) Managing Director Kristalina Georgieva said in a speech on the eve of IMF and Bank spring meetings. which open Monday in Washington with the expected announcement of downward growth forecasts for 2022, or even 2023.
The war and its repercussions will force the IMF to revise downwards the forecasts for 143 countries, representing 86% of the world’s GDP.
“The outlook is extraordinarily uncertain, well beyond normal,” warned the IMF CEO.
Because beyond the suffering and the humanitarian crisis, the conflict between Russia and Ukraine, two major producers of raw materials, is shaking the world economy, aggravating poverty and hunger and increasing the debt burden at a time where many countries are just recovering from more than two years of pandemic.
Everywhere, the pace of growth has slowed and food and energy prices have reached record highs.
“Never before have so many countries experienced a recession at the same time, suffering a loss of capital, jobs and livelihoods,” asserts, for his part, the head of the World Bank, David Malpass.
Referring to soaring food prices with devastating effects on the poorest, he said that for every percentage point increase in food prices, 10 million people are expected to fall into extreme poverty.
According to the IMF, the sharp rise in food and fuel prices “could increase the risk of unrest in some regions, such as sub-Saharan Africa, Latin America, the Caucasus and Central Asia, while the food insecurity is expected to worsen further in parts of Africa and the Middle East”.
In sub-Saharan Africa, for example, record wheat prices are of particular concern. Imports represent around 85% of the region’s supply, a third of which comes from Russia or Ukraine.
Since the outbreak of hostilities in Ukraine on February 24, major disruptions have been felt in trade, supply chains, tourist flows and remittances.
The conflict has also led to a loss of business confidence and heightened investor uncertainty resulting in tighter financial conditions and a possible outflow of capital from emerging markets.
“On top of this double crisis, associating pandemic and war, and on our ability to deal with it or not, there is yet another increasingly present risk: the fragmentation of the world economy into geopolitical blocs, characterized by trade and technology, reserve currencies and different payment systems”, warns the DG of the IMF who evokes a “crucial moment” for the international community.
For the two Bretton Woods institutions, the urgency is to end the war in Ukraine, deal with the pandemic and tackle inflation and debt. A bet that promises to be very complex at a time when the world is particularly fragmented.
These issues will undeniably dominate during the meetings of the IMF and the World Bank which bring together from April 18 to 24 in the American federal capital the ministers of finance and development, the directors of the central banks, the leaders of the private sector as well as representatives civil society organizations, and experts from academia.