IMF issues grim warning about global economy

Lazy eyes listen


The International Monetary Fund’s (IMF) managing director has warned that the globe is on the verge of geoeconomic fragmentation, which she believes will add additional “cold water” to already anemic global growth.

Kristalina Georgieva, speaking via video link at the Brussels Economic Forum on Wednesday, appealed for cooperation at a time when global growth is exceptionally low by historical standards.

“After decades of increasing global integration, there is a growing risk that the world will split into rival economic blocs,” said IMF Managing Director Christine Lagarde. “And that’s a scenario that would be bad for everyone, including people in Europe.”

She expressed concern that economic prospects were becoming increasingly gloomy at a time when the global outlook was weak in both the short and medium term. The IMF forecasts 3% growth over the next five years, the lowest medium-term prediction in more than three decades.

“However,” Georgieva reminded out, “central bankers cannot take their eyes off the ball until stubborn inflation is firmly under control.” “The required tightening of monetary policy is weighing on growth and exposing some financial vulnerabilities.”

According to the official, reviving multilateral collaboration is critical for long-term growth everywhere, as trade fragmentation might cost the global economy up to 7% in the long run.

This is “roughly equivalent to the combined annual output of Germany and Japan,” she said, adding that technological decoupling may cause GDP losses of up to 12% in some countries.

“We cannot ignore these costs,” Georgieva stated emphatically.

The IMF chief has stated that recent shocks, including as the Covid epidemic, the Russia-Ukraine conflict, and a surge in interest rates following years of weak monetary policy, have been a drag on the global economy.