Davos: The International Monetary Fund warns that the global economy faces the “biggest test” since World War II

as the first World Economic Forum The International Monetary Fund, scheduled in person since 2020 and which opened in Davos, Switzerland, on Monday, said the economy faces “perhaps its biggest test since World War Two”.

“We are facing a potential confluence of disasters,” IMF Managing Director Kristalina Georgieva said in a statement.

It warned that Russia’s invasion of Ukraine had “doubled” the effects of the COVID-19 pandemic, weighing on the economic recovery and raising inflation as food and fuel prices soar.

Then there is climate change.

The head of the International Energy Agency urged countries to make the right investment choices in response to fossil fuel shortages caused by Russia’s attack on Ukraine.

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“Some may use the Russian invasion of Ukraine as a pretext… for a new wave of fossil fuel investment,” International Energy Agency chief Fatih Birol said during a discussion in Davos. “It will forever close the door to reaching our climate goals.”

The scale of the economic challenge was underlined by a new report released by the Organization for Economic Cooperation and Development on Monday, which showed that the combined gross domestic product of the Group of Seven countries contracted by 0.1% in the first quarter of the year, compared to the previous three-month period.

“We cannot solve problems if we focus on just one problem,” German Economy Minister Robert Habeck said. “If none of these problems are resolved, I fear we will see a global recession — with huge implications, not only for climate and climate protection, but also for global stability.”

To reduce economic pressures, the International Monetary Fund is inviting government officials and business leaders to meet in Davos to discuss lowering trade barriers.

But as countries grapple with growing concern about the cost of living crisis at home, some are heading in the opposite direction, imposing restrictions on trade in food and agricultural products that could exacerbate shortages and raise prices globally.

Earlier this month, India decided wheat export ban It caused grain prices to rise, despite being a relatively small exporter. Indonesia banned most palm oil exports in April to protect domestic supplies, but it will do so unblock this week.
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Speaking during a visit to Tokyo, President Joe Biden said on Monday that a recession is not inevitable and emphasized that the White House is considering removing some Trump-era tariffs on Chinese goods, which Treasury Secretary Janet Yellen said does more harm than good. American consumers and businesses.

Jason Furman, who previously served as President Barack Obama’s chief economic advisor.

He told CNN Business that the US was “in the least bad shape of any economy in the world”. Consumers are worried about inflation, but they still have a lot of savings, and spending is still strong.

“I am more concerned about the risks of a recession a year or more into the future,” he said. “I think the Fed should try the easy landing. I don’t know they will succeed.”

Meanwhile, China could see its economy shrink this quarter due to the impact of the Covid-19 lockdowns in Shanghai, Beijing and dozens of other cities, and the fallout from the real estate crisis. On Friday, the country’s central bank handed the largest-ever cut to its key interest rate after the collapse of home sales.

Chu Ning, a professor at the Shanghai Advanced Institute of Finance, said he believed the authorities still had many options to address the series of challenges facing the world’s second largest economy.

“China still has plenty of room if it wants to — lower the interest rate, give monetary stimulus to the economy,” he said.

– Anna Cuban, Michelle Toh, Mark Thompson, Allie Malloy, and Inky Cappeler contributed to this article.

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