Ukraine, debt, growth on the IMF ‘menu’

The spring meeting of the IMF and the World Bank begins today in Washington. Concern for the economy is evident, subject to Russia’s participation in the G20 consultations.

Following the economic turmoil of the pandemic, the war in Ukraine is causing new shocks in the world economy: rising energy prices, food and raw material shortages, supply chain problems, inflationary pressures, business uncertainty and consumer uncertainty. On Tuesday, the International Monetary Fund (IMF) is expected to publish its new forecasts for the course of the international economy, which will probably be even more pessimistic than the current ones. This is clear from what the head of the Fund, Kristalina Georgieva, said in the preamble to the summit, speaking at an event at the Carnegie Endowment for International Peace in Washington.

“We estimate that the growth forecast will be manually revised for 2022 and 2023,” said the IMF chief. “Fortunately for most countries, the growth rate remains positive. However, the aftermath of the war has led to a revision of the forecast in hand in 143 countries, which represent 86% of the world economy.” Emerging economies are at risk of facing, in addition, the so-called “spillover effects” of an international crisis, namely the rising cost of borrowing to refinance their debts, as well as the risk of capital flight seeking safe havens.

“Sword of Damocles“ the debt

In addition, Kristalina Georgieva warns of the risk of food crisis in the poorest countries in the world, which are already suffering from the consequences of the drought that affects many parts of the world, especially the Horn of Africa. The IMF and the World Bank are calling on the international community to provide emergency financial assistance to the countries affected in Africa and the Middle East. A common threat to the rich and the poor is of course the ever-increasing debt. “In 2020, lending around the world reached its highest levels since World War II. When debt now reaches 256% of the world economy, we should obviously consider the consequences,” the IMF chief warned.

Ukraine, in which the Russian invasion has caused $ 1 trillion in damage, will also need financial assistance, according to preliminary estimates. The issue will be addressed at the spring meeting of the IMF and the World Bank. In his last speech on Sunday, Ukrainian President Volodymyr Zelensky said he had already contacted Kristalina Georgieva about “rebuilding the country after the war”, but did not reveal details.

Problems are also emerging in the Russian economy, with Commission President Ursula von der Leyen now openly warning of the country’s impending bankruptcy. It remains unknown whether Russia will finally attend Wednesday’s meeting of G20 finance ministers and central bank governors. The US government is threatening to boycott some meetings if a Russian representative is present without a Ukrainian representative being invited. An event of the World Bank for Ukraine is scheduled for Thursday, with the participation of Prime Minister Deniz Smihal and Central Banker Kirill Shevchenko.

Growth in China close to 5%

Rather pleasing – given the circumstances – are the messages for the economy from China: As the representative of the Statistical Service in Beijing announced on Monday, the growth index for the first quarter of 2022 is around 4.8%. This figure may be lower than the Chinese government’s target for this year (5.5%), but clearly higher than what independent analysts had expected (around 4%). China is facing the biggest pandemic in two years, with authorities imposing strict security measures on Shanghai and other major cities. The representative of the Statistical Service does not give details, but as he characteristically points out, “there is a great deal of uncertainty at home and in the international environment, economic growth is facing difficulties and challenges…”

Giannis Papadimitriou (AP, dpa, Handelsblatt)

Source: Deutsche Welle