They paint coarse for the world economy.
Finance ministers from around the world are meeting next week in Washington for the annual meeting of the International Monetary Fund (IMF).
After two years of telematic meetings, one of the most powerful conclaves in the world is once again face-to-face.
The weather forecasts announce some rain in the middle of the week.
The economic ones, black clouds.
The IMF is preparing to lower growth forecasts for 2023 again and warns of the risk of recession, according to Kristalina Georgieva, its managing director, on Thursday.
"The world economy is like a ship in rough waters," said Georgieva in the speech that traditionally serves as a prologue to the meetings, and this time she delivered at Georgetown University in Washington.
He has not beaten around the bush: “We have already lowered our growth forecasts three times, to just 3.2% for 2022 and 2.9% for 2023. And as you will see in our
World Economic Outlook
update next week, we will lower growth for next year.”
With the exception of 2020, the year of the outbreak of the pandemic, in which the world economy fell, the growth figure is going to be the worst since 2009, the Great Recession.
This last word has once again sounded in the mouth of the managing director of the IMF: “The risks of recession are increasing.
We estimate that countries that make up about a third of the world economy will experience at least two consecutive quarters of contraction this or next year.
And even when growth is positive, it will feel like a recession because of declining real incomes and rising prices.”
The dreaded stagflation, economic stagnation accompanied by high inflation, is taking shape.
Forecasts are just that: forecasts.
And Georgieva has recognized that the Fund has been wrong about them.
A year ago, her economists expected that, after strong growth in 2021, the recovery would continue to be solid and price increases transitory.
The opposite has happened, partly because of the war in Ukraine.
The economy has cooled and inflation has entrenched.
High energy and food prices, tighter financial conditions and persistent supply constraints have held back growth.
Georgieva has reviewed how all the world's major economies are in trouble.
The euro zone is severely affected by reduced gas supplies from Russia, China is suffering from pandemic-related disruptions and a deep slump in its property market, and inflation and rising interest rates are weighing on the United States.
As if that were not enough, "things are more likely to get worse than better," says Georgieva.
“Uncertainty remains very high in the context of war and pandemic.
Even more economic shocks could follow”, she has pointed out, pointing to the risks of a financial crisis.
"Rapid and disorderly asset pricing could be amplified by pre-existing vulnerabilities such as high sovereign debt and liquidity concerns in key financial market segments," she said.
The Fund highlights three recipes to deal with the crisis.
First, maintain a tight monetary policy to control inflation.
This is what the big central banks are already doing.
Second, a responsible fiscal policy, something in which they are paying less attention.
Georgieva has expressly warned of the risks of having an expansive policy to try to compensate for the slowdown in growth: “While monetary policy is applying the brakes, there should not be a fiscal policy that is applying the accelerator.
This would be a very hard and dangerous journey.”
The managing director of the IMF calls for efforts to focus on the vulnerable, not across-the-board tax cuts or indiscriminate aid.
And thirdly, to support emerging markets and developing economies.
“We are experiencing a fundamental change in the world economy: from a world of relative predictability, with international economic cooperation, low interest rates and low inflation, to a more fragile world with greater uncertainty, greater economic volatility, geopolitical confrontations and more severe climate catastrophes. frequent and devastating, a world in which any country can deviate from the path more easily and more frequently”, Georgieva has summarized.
The managing director of the IMF has made reference to the painting of the goddess Athena in the imposing Gaston Hall of Georgetown University in which she delivered her speech.
She has appealed to her wisdom, first, and then to her facet as a goddess of weaving: “If we want to go through this period of historical fragility, we must weave a new economic and social fabric that is stronger and more resistant to the tensions it faces. our world today”, he concluded.