BEIJING: IMF Managing Director Kristalina Georgieva has expected the global growth to fall under 3% in 2023 as a direct result of the war in Ukraine and global monetary tightening.
“The global economy has been in choppy waters for quite some time, experiencing shock after shock after shock. We expect 2023 to be another difficult year, with global growth falling under 3 percent as the effects of the war in Ukraine and monetary tightening continue to take hold. A rapid transition from a prolonged period of low interest rates to much higher rates—necessary to fight inflation—has inevitably caused turbulence in the banking sector in some advanced economies and made policy choices even harder,” the IMF chief said while addressing the Boao Forum for Asia in China.
“This year’s Boao Forum offers an answer: through cooperation and solidarity, the twin beacons of light we can rely on to guide us through the challenges that lay ahead. Cooperation has already transformed the global economy by deepening trade integration—which has boosted incomes and living standards across the world. Over the past 40 years, the world economy has tripled in size, with emerging and developing countries quadrupling in size—making them the biggest beneficiaries. In China alone, 800 million people have been lifted out of poverty, as it has become ever more integrated into the world economy. A huge achievement by any standard!” she added.
She described trade integration as a “key ingredient of strong GDP growth for many decades—including trade within the region that now accounts for almost 50 percent of the total and where China is a crucial hub.”
However, she noted that the benefits of globalization have not been shared equally across countries or people. “Our research shows that the long-term cost of trade fragmentation could be as high as 7 percent of global GDP—roughly equivalent to the combined annual output of Germany and Japan. And as a highly integrated region, Asia would be the most adversely affected by runaway fragmentation."
The international official underscored the central importance of cooperation and solidarity with those in greatest need: “Over the past three years, low-income and vulnerable countries and people have been hit especially hard. It starts at home, with governments protecting vulnerable people in their own countries. This means fiscal policy providing targeted support to those most in need or those most affected by food insecurity or the cost-of-living crisis.”