The head of the International Monetary Fund faces the biggest test since World War II amid “the convergence of calamities”

global prospects Economie It’s getting blacker as it faces crisis after crisis, according to International Monetary Fund Managing Director Kristalina Georgieva.

In a blog post before World Economic Forum In Davos, Switzerland, Georgieva warned this week that the global economy faces “the biggest test since World War II” as it faces a “potential confluence of disasters,” including the Russian war in Ukraine and the ongoing fallout from COVID-19. pandemic.

Inflation Rises 8.3% in April, Approaching a 40-Year High

Both the pandemic and the invasion helped fuel high inflation around the world while at the same time depressing economic growth. Soaring food and energy prices are hurting people around the world, while central banks are moving quickly to tighten monetary policy in hopes of curbing inflation — adding to the stress of indebted countries, companies and households.

International Monetary Fund Managing Director Kristalina Georgieva

International Monetary Fund Managing Director Kristalina Georgieva speaks during a joint press conference on COVID-19, March 4, 2020, in Washington, DC. (Samuel Corum/Getty Images/Getty Images)

And she warned that geopolitical disintegration between nations could also have huge global costs, hurting people across the social and economic spectrum. Technological fragmentation alone can cut off 5% of the economies of many countries.

“Our ability to respond is hampered by another consequence of the war in Ukraine – the sharply increased risk of geo-economic fragmentation,” Georgieva said. “Tensions over trade, technology standards and security have risen for many years, undermining growth — and undermining confidence in the current global economic system.

The Washington-based institution lowered its economic forecast this year, forecasting global gross domestic product to grow 3.6% in 2022 — 0.8 percentage points lower than its estimate for January. Moreover, the International Monetary Fund expects global inflation to remain high as a result of the Ukraine war.

“Global economic prospects have deteriorated sharply, in large part due to Russia’s invasion of Ukraine,” Pierre-Olivier Gorenchas, chief economist at the International Monetary Fund, wrote in a blog last month. “This crisis is unfolding even as the global economy has not yet fully recovered from the pandemic.”

Inflation in food prices

A man shops at a Safeway grocery store in Annapolis, Maryland on May 16, 2022. (Jim Watson/AFP via Getty Images/Getty Images)

Inflation accelerated as the economy recovered from a very severe but brief recession caused by the pandemic; Americans are already facing the highest inflation rates in a generation. The Labor Department reported earlier this month that consumer prices rose 8.3% in April from a year earlier, close to a 40-year high.

As a result, the Fed is moving aggressively to tighten monetary policy: the US central bank raised interest rates by half a basis point in May and indicated that increases of similar size are on the table at future meetings. President Jerome Powell He recently pledged that officials would “keep pushing” until inflation fell close to the Fed’s 2% target.

However, he acknowledged that there could be some “pain associated with” lowering inflation and curbing demand, but rejected the idea of ​​an impending recession, identifying the labor market and strong consumer spending as bright spots in the economy. However, he cautioned, a soft landing is not guaranteed.

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“It’s going to be a tough job, and it’s gotten even more difficult in the past couple of months because of global events,” Powell said Wednesday during a live event in the Wall Street Journal, referring to the Ukraine war and the COVID lockdown in China.

But, he added, “there are a number of plausible paths to a quiet or quiet descent. Our job is not to thwart the odds, but rather to try to make it happen.”

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