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IMF boss fears increased recession risk for 2022

2022-07-13T16:14:35.612Z


The head of the International Monetary Fund commented on the global economy in a blog entry: Kristalina Georgieva calls for temporary and targeted measures against the high energy and food prices.


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IMF chief: Kristalina Georgieva

Photo:

Liu Jie / dpa

The International Monetary Fund (IMF) fears a recession in numerous countries should the energy shortages in the wake of the war in Ukraine worsen.

The economic forecasts for the global economy will therefore be lowered again in July, both for this year and next.

This emerges from a blog entry by IMF boss Kristalina Georgiewa.

“2022 will be a tough year and 2023 may be even tougher, with an increased risk of recession.” The outlook has clouded over significantly in recent months.

The second quarter will be weak.

Georgieva referred to high inflation, interest rate increases around the world, ongoing corona restrictions in China, for example, and supply chains that are still disrupted.

The outlook continues to have big question marks, and a global energy crisis cannot be ruled out.

The IMF last reduced its forecasts for the global economy in April, significantly above all for 2022. At that time, growth of 3.6 percent was predicted for both this year and next.

In 2021, the global economy had grown by a whopping 6.1 percent as a recovery from the Corona slump.

Interest rates up, debt down

The Washington-based IMF recommends that countries affected by high inflation do everything they can to get it under control again.

75 central banks around the world have already raised their interest rates since July 2021, by an average of three percentage points.

"Acting now will hurt less than doing it later."

The European Central Bank (ECB) is repeatedly accused, especially in Germany, of having underestimated inflation for a long time and of acting too hesitantly.

According to the IMF, clear communication to the financial markets is crucial when interest rates are turned around.

Emerging markets are under pressure above all because, due to rising interest rates in the USA, for example, capital was withdrawn in June for the fourth month in a row.

That hasn't happened in seven years.

Before the G20 finance ministers' meeting in Bali, the IMF spoke out in favor of abandoning the loose financial policy that has been going on for years.

Poorer parts of the population need more support, but governments must take time-limited and very targeted measures to cushion high energy and food prices, for example.

Direct subsidies have proven to be more effective than market-distorting subsidies or price controls.

However, such aid should be made possible by savings elsewhere - an argument that Federal Finance Minister Christian Lindner (FDP) regularly puts forward in Germany.

According to the IMF, new debt that is too high is not compatible with rising interest rates.

»Reducing debt is an urgent necessity, especially in emerging and developing countries.«

jpa/Reuters

Source: spiegel

All business articles on 2022-07-13

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