Amid compounding crises and difficult tradeoffs, global cooperation remains as crucial as ever to safeguard growth and tackle common challenges. The IMF Managing Director and the World Bank President opened the 2022 Annual Meetings Seminar Series by discussing the daunting global economic situation, with challenges ranging from lingering pandemic-related supply-side disruptions, Russia’s war in Ukraine, stubbornly high inflation, risks to food security, and climate change.
Key Points:
- A difficult and complex time. The risk of an economic recession in 2023 is rising due to persistently high inflation, rising debt levels in developing countries, and tighter financial conditions. Georgieva noted that the world may be experiencing a fundamental shift from one with a strong rules-based international order and low inflation and interest rates, to a more volatile world where emerging markets and developing economies (EMDEs), in particular, must tackle difficult challenges with limited policy room.
- Development goals. The compounding effects of these multiple challenges have hurt progress toward the goal of shared prosperity. Among the issues straining global economic development, Malpass highlighted the concentration of the world’s capital in advanced economies—in the form of fiscal deficits, heavy borrowing by large corporations, and central banks buying bonds of only advanced economies. He also drew attention to education setbacks, energy crises, fertilizer shortages, and food insecurity.
- A narrow path for policymakers. Georgieva advocated for (i) decisive action against runaway inflation while noting the risks of recession from overtightening policy; (ii) targeted measures to support the most vulnerable; and (iii) multilateral cooperation to support EMDEs and mitigate the risks of a debt crisis. Malpass highlighted the need for growth policies and for advanced economies to consider limits to debt issuance and to adjust central banks’ bond purchasing policies to tackle the regulatory and capital bias working against EMDEs.
- Global cooperation. Speakers stressed the importance of multilateral cooperation to address food insecurity, debt issues, and climate change, and noted that the Fund and the Bank had stepped-up their support to the membership. Georgieva called for concerted global efforts to stabilize the world economy and prepare for a stronger future.
Contributor: Daniela Alcantara
