Robust recovery after the Covid-19 pandemic remains “elusive,” Kristalina Georgieva has said © Getty Images/Michael Hall
The world economy is facing its weakest period of growth since the 1990s in the next five years due to problems triggered by the pandemic and political tensions, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated on Thursday.
A severe slowdown in the global economy last year following the Covid-19 pandemic and the conflict in Ukraine is set to continue in 2023 and could persist for the next five years, she warned.
Global GDP will grow at about 3% over the next half decade compared to an average of 3.8% seen in the past 20 years, representing the worst economic performance in more than three decades. The IMF expects global GDP to expand by less than 3% this year, which is in line with its January projection of 2.9%.
Last year, global growth almost halved following an initial post-pandemic rebound in 2021, sliding from 6.1% to 3.4%, Georgieva said ahead of the IMF World Economic Outlook report, which is due to be released on April 11.
Up to 90% of advanced economies are likely to experience a decline in their growth rate this year, she warned, with activity in the US and the Eurozone hit by higher interest rates.
“With rising geopolitical tensions, with inflation still running high, a robust recovery remains elusive,” Georgieva said. “That harms the prospects of everyone, especially for the most vulnerable people and most vulnerable countries,” she added.
The IMF head warned against economic fragmentation stemming from geopolitical tensions and urged countries to take action to boost global productivity.
According to Georgieva, soaring inflation facing most of the world’s wealthy nations will force central banks to continue interest-rate hikes, adding pressure to the banking industry despite financial uncertainty following recent turmoil with lenders in the US and Switzerland.
She urged the world community to “be vigilant and more agile than ever,” adding that regulators may come across more complicated choices to protect the financial system amid persistent inflation and challenges in the banking sector.
Long-term disintegration in global trade such as restrictions on capital flows and international cooperation, as well as curbs on migration, could slash global GDP by up to 7% or $7 trillion, which is the equivalent of the combined annual production of Germany and Japan, Georgieva warned.
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