David Malpass_Kristalina Georgieva_IMF annual meeting 2022

IMF estimates risk of worldwide economic loss at $4 trillion dollars from 2022 to 2026 by slowdown

Under the sharpest slowdown in economic activity in 80 years, rising inflation, a food and energy crisis, the war in Ukraine, the continuing impact of COVID-19 and climate change, IMF Managing Director Kristalina Georgieva and World Bank Group President David Malpass warn on an actual risk of a worldwide recession by 2023 bringing slowdown sequels till 2026.

Just last week, also during the IMF Anual Meeting 2022, warned as well that even if some countries may experience economic growth next year the feeling among their population will be a feeling of recession because of the high inflation and the compound factors slowing down economic growth.

There’s a growing risk of worldwide recession, said Malpass

“There’s the risk and the real danger of a world recession next year, the advanced economies are slowing in Europe. And so we’ll see where it where it goes into next year. But the the currency depreciation means that the debt levels for the developing countries are getting more and more burdensome. The rise in interest rates puts added weight on it. And inflation is still a major problem for everyone, but especially for the poor,” World Bank’s David malpass pointed.

“We are seeing slow down in all three key economies of the world. Eurozone, because primarily of gas prices shooting up China, because of COVID disruptions and the volatility of the housing sector, we see a very significant problem in China dragging down growth. And in the United States, still very strong labor market, but also losing a bit of momentum because interest rates are starting to bite,” Georgieva added.

An amount equivalent to one year Germany’s GDP will be whipped out from 2022 to 2026

“We have calculated that about one-third equivalent of the world economy would have at least two consecutive quarters of negative growth this year, next year, and that the total amount that would be wiped out by the slowdown of the world economy is going to be between now and 2026, four trillion dollars. This is the size of Germany, GDP gone,” IMF’s Kristalina Georgieva quantified.

Climate change the overarching priority, even over recession

“I want to be very clear on this week. It is bad to have inflation, but we will survive as humanity. And it’s very bad to have recessions. It would affect people horribly, especially poor people. But we can survive it as humanity. We cannot survive on unabated climate crisis. So mobilizing today. For a more resilient tomorrow is exactly what we should do,” said Georgieva.

In response to the issue of climate change, Malpass pointed to a trust fund the World Bank is launching to try and address the problem.
“The World Bank has a lot of the key trust funds that are making available global resources into the climate space. We’re launching right now one called Scale, which is sustainable climate action. That will be a major conduit for the world putting money into the climate space, because one of the big challenges has been to have projects that are really impactful,” Georgieva said.

Image over the headline.- Kristalina Georgieva (IMF Managing Dirctor) and David Malpass (Word Bank Group President) discuss on how the compounding crises are threatening livelihoods and taking a toll on the most vulnerable. Caption of the video provided by the IMF.

Related Eastwind links:

IMF and World Bank warn on risk of recession in 2023 with 4trill dollar loss from 2022 to 2026 (video)

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