IMF Chief Says Risks to a Broad Global Recovery Are Rising
(Bloomberg) -- The International Monetary Fund said the risks to a broad global economic recovery are rising due to a persistent divide in vaccinations, accelerating inflation and burgeoning debt that all threaten to leave developing countries far behind.
The fund expects gross domestic product to “moderate slightly” compared with its 6% expansion projection made in July, Managing Director Kristalina Georgieva said in a virtual speech Tuesday. All three issues were worse for low-income countries and will likely persist in those economies for longer, she said.
“Risks and obstacles to a balanced global recovery have become even more pronounced” since the lender last updated its World Economic Outlook in July, Georgieva said. The fund is scheduled to release a new forecast next week at the outset of the IMF and World Bank’s annual meetings, which will take place in a hybrid format online and in-person in Washington.
The IMF’s annual meeting arrives just as its chief is embroiled in a scandal from her time at the World Bank. Georgieva has mounted a defense against accusations that she improperly influenced a report in China’s favor in 2017, saying the claim is “simply untrue.” The IMF said Monday its executive board is conducting a “thorough, objective and timely review” of the matter.
Georgieva didn’t address the allegations in the advance text of her speech.
“Most emerging and developing countries will take many more years to recover,” she said. “This delayed recovery will make it even more difficult to avoid long-term economic scarring -- including from job losses, which hit young people, women, and informal workers especially hard.”
On inflation, price pressures should subside in most countries next year, but they will persist in some emerging and developing economies, Georgieva said. If inflation spurs a rapid jump in interest rates, that would “pose a particular challenge for emerging and developing economies with high debt levels.”
Those nations, which had little fiscal firepower at the start of the pandemic, now have even less, she said.
In August, the fund made new reserves available to its members worth a total of $650 billion, the largest issuance in its history. Georgieva encouraged countries with strong economic positions to voluntarily channel their special drawing rights, or allotment of funds, to countries most in need.
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