Wednesday, February 8, 2023

Georgieva (IMF) rules out a recession but also a “drastic” growth

The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, has been cautious about the recovery of the global economy in 2023 and has ruled out a recession, although she does not believe there will be “a drastic improvement” from the current growth forecast. , which is 2.7%.

For Spain, the agency has increased its growth forecast by six tenths, to 5.2% in 2022, and has lowered that of 2023 to 1.1%.

On the last day of this edition of the Davos Forum, Georgieva analyzed, together with the President of the European Central Bank (ECB), Christine Lagarde; the governor of the central bank of Japan, Haruhiko Kuroda, and the French Minister of Finance, Bruno le Maire, the policies necessary to boost growth globally.

Georgieva has acknowledged that her impression is “somewhat better than a couple of months ago”, but not “completely optimistic”, despite the fact that “inflation has improved, which is going in the right direction”, and China’s growth may return to exceed the global average this year.

In addition, the job market is in excellent shape and consumers “consume and sustain growth.”

Without wanting to position itself “neither as very optimistic nor as very pessimistic”, he has warned of risks such as uncertainty about the evolution of inflation, which maintains a downward trend that can be reversed, and the interruption of supply chains, one of the effects of the war in Ukraine, which has had a full impact on trade, the engine of growth in the past decades.

Lagarde, who this week reiterated at the Davos Forum that inflation “continues at very high levels”, has also recognized “certain improvements and has admitted that the situation” is not as bad as feared”, although the year 2022 has been “extremely rare”, with unusual growth rates.

China has woken up again, aspires to grow by 5.5% and it has become clear that “its ‘covid zero’ policy is going to cause many victims but it is going to allow the country to return to the path of growth”, he pointed out.

And naturally, this will once again push energy prices up and, consequently, affect inflation, once the Asian country begins to increase its demand.

Regarding possible interest rate hikes, Lagarde has insisted that “staying the course is the ECB’s monetary policy mantra.”

The Japanese Kuroda, who has defended his country’s effort to return to the path of growth after decades of deflation, has opted for moderate optimism and has predicted that the country’s economy “can grow between 1% and 2% in the next two years.”

Le Maire has preferred to focus on one of the main themes of this edition of the Davos Forum, the fight against climate change and decarbonisation, and has pointed out that “it is not about China, the United States or Europe, but about the climate”.

In his opinion, everything that is done, “everything that is invested must go in this direction” or, otherwise, the bill will be “infinitely more expensive.”

The IMF’s position, Georgieva said, is the same, which is why the agency encourages the investment of public and private capital “in this sector in particular and emerging countries in general”, since “green” agreements may “not be effective in emerging countries.

Le Maire also stressed the urgency of “putting an end to the war in Ukraine, which is not a regional conflict, but a global one, and has a direct impact on the price of raw materials and energy, as well as posing a threat to common European values.

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