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“With geopolitical tensions escalating and inflation still high, a strong recovery remains elusive,” Kristalina Georgieva, Managing Director of the International Monetary Fund, said in a recent speech in Washington. This is in addition to the recent pressures in the banking sector that have led to global inflation Fighting this is more complicated, she added.
Ahead of the International Monetary Fund’s World Economic Outlook this week, Georgieva called for global growth to remain at around 3% over the next five years, the weakest medium-term growth forecast since 1990 and well below the 3.8% average. of the past two decades.
Growth below 3% this year is broadly consistent with the 2.9% estimated in January and the 2.7% estimate in October.
Developed economies are expected to weigh more on global growth, particularly in the United States and Europe where rising borrowing costs have hampered demand. The International Monetary Fund sees about 90% of advanced economies recording a decline in their growth rate in 2023. In contrast, emerging economies are a “bright spot” as India and China together are expected to account for 50% of global growth for this year.
Referring to Russia’s invasion of Ukraine — an inflationary development — Georgieva said: “This catastrophe not only kills innocent people, but it also exacerbates the cost-of-living crisis and brings more hunger around the world. It risks wiping out the dividend of peace that we have so far enjoyed.” over the past three decades, which also adds to the controversies in trade and finance.”
Noting central banks’ battle of inflation in the wake of global banking issues, the IMF chief implored “central banks to stay the course” in lowering inflation as long as financial pressures remain limited. Last month was one for the books, as three US regional lenders — Silicon Valley Bank (OTC: SIVBQ), Signature Bank (OTC: SBNY), and Silvergate Capital (SI) — failed in just one week, then the troubled Swiss lender. Suisse (CS) was forced into a government-brokered takeover to avoid further turmoil in the sector.
While Georgieva implied that central banks should keep monetary policy constrained until price stability is achieved, she also urged them to “address financial stability risks when they arise by providing adequate liquidity. The key is to carefully monitor risk in banks and non-bank financial institutions, So are weaknesses in sectors such as commercial real estate.”
However, if the turmoil in the banking system worsens, it acknowledged that central banks may have to cut interest rates directly. On Thursday, JPMorgan Chase (JPM) Chairman and CEO Jamie Dimon told CNN in an interview that banking pressures have boosted the odds of a recession in the United States, a scenario that money markets appeared to be hedged against in recent weeks.
“There are still concerns about vulnerabilities that may be hiding, not only in banks but also in non-banks – now is not the time for complacency,” Georgieva added.
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