THE INTERNATIONAL Financial Fund (IMF) is poised to cut its international growth forecast for 2022 as a results of the conflict in Ukraine, and sees recession dangers in a rising variety of international locations, Managing Director Kristalina Georgieva mentioned.
The world economic system remains to be set to broaden in 2022, although by lower than the 4.4% beforehand anticipated, Ms. Georgieva mentioned in an interview with Overseas Coverage journal broadcast Tuesday. The IMF is about to replace its projections in April when the fund holds its annual spring conferences.
“Some economies that have been fast to recover from COVID are in a stronger position” to deal with the reverberations from Russia’s invasion of Ukraine, Ms. Georgieva mentioned. The US specifically has “fairly strong fundamentals,” she mentioned. “But those that were not yet coming out of the COVID crisis, that were falling further behind, they’re going to be hit even harder,” with the “possible risk of recessions.”
Tighter monetary circumstances, as the Federal Reserve and different developed-world central banks increase rates of interest, can be a “big shock” for many international locations, in accordance to Ms. Georgieva. About 60% of low-income international locations are in “debt misery’ or shut to it, double the quantity that the IMF was fearful about again in 2015, she mentioned.
Ms. Georgieva’s high deputy, Gita Gopinath, mentioned in the identical occasion that the IMF sees “increasing fragmentation” in international funds techniques as one consequence of the conflict.
The US greenback isn’t about to endure an “imminent demise” as the dominant foreign money within the international monetary system, however “we could see pockets where we might see shifts happening,” Ms. Gopinath mentioned. “We are likely to see some countries reconsidering how much they hold of certain currencies in their reserves,” whereas it’s clear that the best way power is traded has modified “forever.”
Relying on how lengthy the conflict lasts, there may very well be bigger results, Ms. Gopinath mentioned, although she described the potential impression of a Russian debt default as restricted and “not a systemic risk to the global economy.”
The fund can be monitoring how the conflict impacts use of cryptocurrencies, and expects an acceleration within the growth of central-bank digital currencies, Ms. Gopinath mentioned. Each she and Ms. Georgieva mentioned extra work is required to strengthen laws on this space.
Ms. Georgieva mentioned the IMF has “three-quarters of our $1 trillion of lending capacity available” to assist international locations deal with the dangers. She additionally mentioned that the fund will do its “part” for Ukraine when the conflict ends and reconstruction begins. The nation’s economic system might shrink by a 3rd in contrast with earlier than the conflict, she mentioned.
The IMF chief mentioned she has members of the family in Kharkiv, a metropolis in japanese Ukraine that’s been a goal of Russian forces. Ms. Georgieva mentioned that she had been in contact together with her household and that they’re protected for now, although their constructing has misplaced its water provide and they’re listening to bombing each day. — Bloomberg