Xinhua News Agency, Washington, October 12 (Reporter Xiong Maoling)International Monetary Fund (IMF) warned on the 11th that the current world economy is facing many challenges, with huge downward risks and may even decline. In the latest issue of " World Economic Outlook Report " released by the agency on the same day, the global economic growth rate will slow significantly from 6% in 2021 to 3.2%, and further slow to 2.7% next year.
observers believe that the radical " interest rate hike" of developed economies such as the United States is leading to a slowdown in the world economy and a tightening of the financial environment, bringing a huge impact to emerging markets and developing countries, especially underdeveloped countries. Developed economies should fully consider the spillover effect of monetary policy, while emerging economies and others need to take positive measures to deal with risks.
Multiple factors impact the global economy
IMF pointed out in the report that the current global economy is facing many challenges: the inflation rate has reached its highest level in decades, the financial environment in most regions is tightening, the Ukrainian crisis escalating and the continued COVID-19 pandemic have seriously affected the prospects of global economic growth.
report predicts that the euro zone economy, which is plagued by the energy crisis, will be most significantly affected, and the economic growth rate may drop to 0.5% in 2023. The U.S. economic growth rate will also drop to 1% in 2023. From 2022 to 2023, dozens of economies around the world may experience a "technical recession", that is, real GDP shrinks for at least two consecutive quarters.
IMF chief economist Pierre Olivier Gulansha said at the press conference that the energy crisis faced by Europe and other regions is not a short-term impact, and the impact of adjusting energy supply based on geopolitical factors is wide and lasting. "The winter of 2022 will be challenging, but the winter of 2023 may be worse."
This is the International Monetary Fund headquarters building taken on April 19 in Washington, USA. Xinhua News Agency (photo by Shen Ting)
In addition to the energy crisis, monetary policy adjustments and rising price pressures will also pose a threat to world economic growth. The IMF said that monetary policy adjustments should be moderate, and it is necessary to avoid excessive tightening leading to severe economic recession, and to avoid insufficient tightening leading to out-of-control inflation. The institution said that the soaring inflation squeezed real income and undermined the stability of the macroeconomic , which is the most direct threat to current and future economic development.
Policy spillover in developed economies has caused concerns
In the context of high inflation levels, developed economies such as the U.S. Federal Reserve Central Bank hikes aggressively, causing emerging markets and developing countries to bear tremendous pressure. Daniel Leigh, head of world economy at the IMF Research Department, told Xinhua News Agency reporters that emerging markets, especially commodity exporters, have suffered a heavy blow in the "rate hike" of developed economies.
Daniel Leigh said that Federal aggressive interest rate hikes triggered a sharp appreciation of the US dollar, resulting in a sharp increase in debt pressure from countries denominated for borrowing in US dollars, especially the burden on underdeveloped countries is becoming heavier. IMF data shows that more than a quarter of emerging economies have either defaulted on their debt or their bond prices have plummeted; more than 60% of low-income countries are facing debt difficulties.
This is the Federal Reserve Building taken on June 22 in Washington, USA. (Photo by Liu Jie, Xinhua News Agency) The latest issue of the "Global Financial Stability Report" released by
IMF on the 11th pointed out that the strengthening of the US dollar, high external borrowing costs, high inflation, fluctuations in the commodity market, intensifying uncertainty in the global economic outlook and the pressure brought by the tightening of policies in developed economies all bring risks to the development of emerging market economies. Tobias Adrian, director of the Money and Capital Markets Department of IMF, said in response to a question from Xinhua News Agency reporters at the press conference that the impact of tightening financial policies in the United States and other countries will definitely spill overflow. The strengthening of the US dollar and rising interest rates will make financial situations in countries around the world more tense.
It is crucial for all economies to coordinate responses
Previously, a study released by the World Bank called on central banks in developed economies to take into account the impact of spillovers in tightening monetary policies, and it is necessary for central banks to communicate clearly while maintaining independence.The World Bank warns that synchronous interest rate hikes from central banks around the world will put the world economy into recession, and even lead to financial crises in emerging markets and developing countries, causing lasting damage.
On April 20, pedestrians walked past the World Bank headquarters in Washington, USA. (Photo by Liu Jie, Xinhua News Agency)
is particularly important for emerging markets to take appropriate response measures. Gulansha said that the sharp appreciation of the US dollar has driven up the cost of imported goods and brought severe challenges to emerging economies and developing countries. He suggested that most countries should adjust their monetary policies to maintain price stability while maintaining foreign exchange reserves to cope with worsening financial conditions.
Daniel Leigh pointed out that foreign exchange intervention measures in emerging economies may have a positive impact on responding to financial market pressures, and once they fall into very difficult situations, they can try to use capital flow management tools. In addition, he suggested that fiscal policy should provide targeted support to the most vulnerable groups, and keep the overall position of fiscal policy relatively neutral, so as to avoid the effects of the policy contrary to the original intention of fighting global inflation.
