On Thursday, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva predicted the world economy will face is weakest growth since the 1990’s over the next five years, due to lingering problems produced by the pandemic and rising political tensions across the world.
She warned, the severe slowdown in the global economy last year, which followed on from the Covid-19 pandemic as well as the conflict in Ukraine, have produced effects in the global economy, which could persist for the next half-decade.
She predicts that global GDP will increase by roughly 3% over the next five years, as opposed to an average of 3.8% seen over the last two decades. That will represent the worst economic performance in over three decades. The IMF is presently predicting global GDP will expand by less than 3% this year, which remains in line with its January projection of 2.9%.
Following an initial post-pandemic rebound in 2021, global growth last year was almost halved, dropping from 6.1% to 3.4%, Georgieva noted ahead of the IMF World Economic Outlook report, scheduled for release on April 11th.
Georgieva warned that as much as 90% of the world’s advanced economies will likely see a reduction in their growth rate this year, with the US and Eurozone economies in particular hit by higher interest rates put in place by their central banks.
Georgieva said, “With rising geopolitical tensions, with inflation still running high, a robust recovery remains elusive. That harms the prospects of everyone, especially for the most vulnerable people and most vulnerable countries.”
She went on to warn against letting geopolitical tensions produce economic fragmentation, as she urged countries to take measures to boost global productivity.
She also noted the world may not have escaped the perils of the banking crisis yet. She pointed out that soaring inflation in the world’s wealthier nations will lead to their central banks continuing to raise interest rates. That will place more pressure on the banking sector, as it is already struggling with a crisis in investor and depositor confidence, following the turmoil recently in the US and Switzerland.
She said the world community will need to “be vigilant and more agile than ever,” and that regulators may find they will encounter more complicated choices to protect the financial system as persistent inflation meets challenges in the banking sector.
She also warned that factors which impede global trade, such as capital flow restrictions, or factors which impede international cooperation, or curbs on migration could cut global GDP by as much as 7% or $7 trillion, which would be equivalent to the annual production of Germany and Japan.
