International Monetary Fund IMF Managing Director Kristalina Georgieva discusses the global economy and policy priorities ahead of the 2022 Annual Meetings at Georgetown University's School of Foreign Service on October 6, 2022 in Washington, DC. OLIVIER DOULIERY AFP WASHINGTON - The International Monetary Fund will downgrade its forecast for 2.9 percent global growth in 2023, according to Managing Director Kristalina Georgieva on Thursday. He said there were rising risks of the recession and financial instability.
Georgieva said that the outlook for the global economy was darkened due to the shocks caused by the COVID 19 pandemic, the Russia-Ukraine conflict and climate disasters on all continents, and it could get worse.
She said in the text of a speech at Georgetown University that we are experiencing a fundamental shift in the global economy, from a world of relative predictability to a world with more fragility - greater uncertainty, higher economic volatility, geopolitical confrontations and more frequent and devastating natural disasters.
Georgieva said that the old order, which is characterized by low interest rates and low inflation, is giving way to one in which any country can be thrown off course more easily and more often. ALSO READ: WTO warns that the 'darkened' trade outlook could deteriorate further.
She said that all of the world's largest economies were now slowing down, which has dreaked havoc on demand for exports from emerging and developing countries, already hit hard by high food and energy prices.
When the World Economic Outlook is released next week, the IMF will drop its growth forecast from 2.9 percent to 2.9 percent, its fourth downward revision this year. She said the global lender would leave its current forecast for 3.2 percent growth in 2022 unchanged and gave no number for the new forecast for 2023.
The Ukrainian conflict and global economic risks will dominate the annual meeting of the IMF and the World Bank in Washington next week, which brings together finance ministers and central bankers from around the world.
The International Monetary Fund estimates that countries accounting for about one-third of the world's economy will see at least two consecutive quarters of contraction this year or next, Georgieva said.
She said that even when growth is positive, it will feel like a recession because of shrinking real incomes and rising prices.
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The IMF expects global output to shrink by US $4 trillion between now and 2026. She said that is roughly the size of the German economy and amounts to a massive setback.
She said that high debt levels and liquidity concerns could cause a rapid and disorderly repricing of assets on financial markets and that there was an uncertainty remained high and more economic shocks were possible.
Georgieva said that inflation remained stubbornly high, but central banks should respond decisively, even if the economy slowed down.
She said fiscal measures adopted in response to high energy prices should be targeted and temporary.
While monetary policy is hitting the brakes, you shouldn't have a fiscal policy that is stepping on the accelerator. This would make for a very rough and dangerous ride. READ MORE: IMF: Some Asian economies may need rapid rate hikes.
Georgieva urged greater support for emerging markets and developing countries, noting that high interest rates in advanced economies and the strong dollar had triggered capital outflows. The probability of portfolio outflows had gone up to 40 percent.