NewsRescue
The world economy is facing its weakest period of growth since the 1990s in the next five years due to problems triggered by the pandemic and political tensions, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated on Thursday.
She warned that a severe slowdown in the global economy last year caused by the Covid-19 pandemic and the conflict in Ukraine would continue in 2023 and could last for the next five years.
Global GDP will grow at a rate of about 3% over the next half-decade, compared to an average of 3.8% over the previous two decades, representing the worst economic performance in more than three decades. The IMF expects global GDP to grow by less than 3% this year, matching its January forecast of 2.9%.
Global growth nearly halved last year after an initial post-pandemic rebound in 2021, falling from 6.1% to 3.4%, according to Georgieva, ahead of the IMF World Economic Outlook report, which is set to be released on April 11.
She warned that up to 90% of advanced economies’ growth rates are likely to slow this year, with higher interest rates weighing on activity in the United States and the Eurozone.
“With rising geopolitical tensions and high inflation, a robust recovery remains elusive,” Georgieva said. “That harms everyone’s prospects, particularly the most vulnerable people and countries,” she added.
The IMF head warned against economic fragmentation stemming from geopolitical tensions and urged countries to take action to boost global productivity.
According to Georgieva, rising inflation in most of the world’s wealthy countries will force central banks to continue raising interest rates, putting pressure on the banking industry despite financial uncertainty following recent turmoil with lenders in the United States and Switzerland.
She urged the international community to “be vigilant and more agile than ever,” adding that regulators may face more difficult choices to protect the financial system in the face of persistent inflation and banking sector challenges.
Long-term disintegration in global trade, such as restrictions on capital flows and international cooperation, as well as migration restrictions, could reduce global GDP by up to 7%, or $7 trillion, the equivalent of Germany and Japan’s combined annual output. Georgieva issued a warning.
