The world is hurtling towards a “dangerous new normal,” the head of the International Monetary Fund (IMF) has warned.
Kristalina Georgieva, managing director of the IMF, says that the world is facing the risk of a recession, with the global economy experiencing a “fundamental shift.”
Georgieva made the comments during a speech at Georgetown University on Thursday.
Slaynews.com reports: In just three years, the world has lived through “shock, after shock, after shock,” Georgieva said.
The world had to deal with the COVID-19 pandemic, the Russian invasion of Ukraine, and “climate disasters on all continents,” she claimed.
She said that such shocks have caused “immeasurable harm” to people’s lives.
The combined effect has been a surge in the prices of goods, especially energy and foods, creating a cost-of-living crisis, she said.
The world is seeing a “fundamental shift” in the global economy, moving away from a world of relative predictability— which had a rules-based framework for international economic cooperation, low inflation, and low-interest rates—to a world of more fragility, greater uncertainty, geopolitical confrontations, higher economic volatility, and more frequent devastating natural disasters, she said.
To prevent this period of heightened fragility from becoming a “dangerous new normal,” the world must focus on stabilizing the global economy, revitalizing cooperation, and transforming the economy to build resilience against any future shocks, Georgieva said.
Uncertainty remains “extremely high” in the context of the pandemic and Russia’s war in Ukraine.
Georgieva raised the possibility of “even more” economic shocks, pointing out that financial stability risks are rising.
The IMF head wants policymakers to focus on bringing down inflation and put in place a responsible fiscal policy that protects the financially vulnerable.
“The deeper causes of the world’s fragility can only be addressed by countries working together,” she said.
In her speech, Georgieva pointed out that the IMF had projected a strong recovery after the COVID-19 pandemic, with the agency’s economists thinking that inflation would quickly subside.
“But this is not what happened,” she said.
“Multiple shocks, among them a senseless war, changed the economic picture completely.
“Far from being transitory, inflation has become more persistent.
“We have downgraded our growth projections already three times, to only 3.2 percent for 2022 and 2.9 percent for 2023.