Global economy as a ‘ship in turbulent waters’: IMF chief warns current crisis ‘likely to get worse than better’
The boss of the International Monetary Fund said the global economy was like a “ship in turbulent waters” as she warned the current crisis is “more likely to get worse than better”.
Kristalina Georgieva, IMF chief executive, said the organization was preparing to reveal more downgrades next week, which would wipe out global manufacturing of £3.6 trillion between now and 2026.
This enormous loss of wealth would be greater than the size of the German economy.
Warning: Kristalina Georgieva said the IMF planned to reveal more downgrades that would wipe out £3.6 trillion in global manufacturing between now and 2026
And in a joke about Liz Truss’ tax cuts, she warned governments against providing “arbitrary fiscal aid” to their citizens — instead to policymakers to help the poorest.
Georgieva’s speech at the opening of the IMF’s annual meeting in Washington DC came just days after the global watchdog reprimanded Prime Minister and Chancellor Kwasi Kwarteng.
It warned last week that their tax cuts in September’s mini-budget risked undermining the Bank of England’s efforts to curb rampant inflation.
Yesterday, Georgieva repeated that message: “While monetary policy is on the brakes, you shouldn’t have fiscal policy stepping on the accelerator. This would make for a very rough and dangerous ride.’
Truss and Kwarteng have defended their policies by claiming they will drive growth in the long run.
But unless inflation is brought under control, Georgieva said, future interest rates should be “much higher and more sustainable, causing massive damage to growth and tremendous damage to people.”
The IMF has cut its global growth forecasts three times this year, to just 3.2 percent for 2022 and 2.9 percent for 2023.
Georgieva said that when the organization publishes its next World Economic Outlook next week, it will again downgrade growth for next year. “And we will indicate that the risks of a recession are increasing,” she said.
“We estimate that countries that account for about a third of the global economy will experience at least two consecutive quarters of contraction this year or next.
And even if the growth is positive, it feels like a recession due to falling real incomes and rising prices.’
Several economists think the UK may already be in a recession.
The eurozone is also teetering on the brink, while the United States has already experienced two quarters of economic contraction.
Georgieva said: ‘This is not easy and in the short term it will not be without pain. But the key is to prevent much greater and longer-lasting pain for everyone.”