IMF Advises The International Community To Be Optimistic About The Possibility Of An Economic Recovery

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) has advised the international community to be optimistic about the possibility of an economic recovery.

According to the IMF Managing Director, there is a growing sense of optimism mixed with caution regarding the global economic outlook.

Indications are that inflation is leveling off, and experts including those at Davos predict a moderate increase in growth rather than a full-scale recession.

Kristalina made this comments during the World Economic Forum’s Annual Meeting in Davos while speaking at the closing meeting of the Forum’s Annual Meeting, dubbed Global Economic Outlook: Is this the End of an Era?

During her delivery, Kristalina called for a realistic approach to predictions and also advised monetary authorities to maintain their current policies, imploring them to ‘stay put’.

“Stay put. My message is it is less bad than we feared a couple of months ago — but less bad doesn’t quite yet mean good. Let me start from what has improved and why we have to be cautious. What has improved is inflation seems to have started leading in the right direction, in other words, down.”

“What has improved is the prospect for China to boost growth. We project 2.7 per cent for the world. This may be corrected somewhat in a couple of days… What is positive is that we have seen demonstrably the strength of labor markets translating into consumers spending and keeping the economy up.”

Kristalina Georgieva

Proceeding, Kristalina reiterated her plea for caution, making clear the poor outlook of the global economy.

“Why we should be cautious? Well, first, 2.7 per cent growth, if this is the growth we achieve, by far is not fabulous. This is the third lowest growth rate in the last decades after the global financial crisis and COVID. It’s not great.”

Madam Georgieva

China’s Recovery, Likely To Be A Threat

The Managing Director of the IMF cautioned that a resurrection of China’s economy, which has been stagnant for the past three years due to the pandemic, could lead to an increase in inflation. She asked; “What if the good news of China growing faster translates into oil and gas prices jumping up, putting pressure on inflation?”

“Stay in the middle of realism that seems to serve the world well.”

Kristalina Georgieva

The ongoing conflict in Ukraine poses a significant threat to global economic confidence, particularly in Europe she warned.  

Madam Georgieva also stressed the possibility of a resurgence in unemployment, stating that “It is very different for a consumer to have cost of living crisis and a job than to have cost of living crisis and no job.”

The rate of unemployment globally is already on the surge with the tech industry leading the statistics.

Kristalina further cautioned that a fragmentation of global trade could impede or even undo the fragile global economic recovery.

“If we diversify rationally, the cost of this adjustment would be low. We put it down to 0.2 per cent of GDP. If we are like an elephant in a china shop and we trash trade that has been an engine for growth for so many decades, the costs can go up to 7 per cent loss of GDP: $7 trillion.”

Kristalina Georgieva

The above illustration came up in Kristalina’s advice on supply chains.

“Be pragmatic, collaborate, do the right thing. Keep the global economy integrated for the benefit of all of us”, she said in her final words to the monetary authorities in rounding up her address during the Forum at Davo.

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