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Analysts said that they hope that the international community can form more cooperation opportunities at the level of geopolitical , and reverse the situation where cooperation between major powers has been blocked in the past few years.
"The worst moment has not come yet, and a recession will be felt in 2023." International Monetary Fund (IMF) made such judgment on the world economic outlook on October 11.
On the same day, the latest IMF " World Economic Outlook Report " was released. It is expected that global economic growth will remain at 3.2% this year and will fall to 2.7% next year. About one-third of the world's economies will shrink.
analysts pointed out that the many problems encountered by the world economy are fundamentally caused by geopolitical division. In the current crisis, it is particularly important to strengthen policy coordination among major economies and promote bilateral and multilateral international cooperation.
remains pessimistic
In recent times, international public opinion has been constantly warning about "world economic recession".
On the first day of the opening of the IMF and World Bank 2022 autumn annual meeting on the 10th, World Bank President Malpass announced in his speech that the world will face the real danger of an economic recession next year.
As expected, the World Economic Outlook Report released on the 11th echoes the above judgment. The IMF pointed out that the global economy will grow by 3.2% this year, the same as the July forecast, but the global economic growth rate will slow to 2.7% next year, down 0.2 percentage points from the July forecast.
IMF admits that the weak global economic growth situation is the worst since 2001, except for the 2008 financial crisis and the worst period of the new crown pneumonia epidemic in 2020. "In short, the worst moment hasn't come yet. People will feel a recession next year," the IMF said.
The outside world has noticed that this is a rare since 2000 that the IMF has set the global economic growth forecast for the next year below 3%, which is in contrast to the forecast of 3.8% next year's growth rate at the beginning of the year. It is equivalent to being "halved" compared with the 6% growth rate of the global economy last year.
Why did the IMF's perception of the global economy become particularly cold after more than half a year?
According to the IMF, global economic growth faces many challenges: inflation rate reaches its highest level in decades, financial environment tightening in most regions, the Ukrainian crisis and the continued COVID-19 pandemic, etc., jointly creating a period of economic, geopolitical and ecological turbulence.
"The global economy is undergoing a fundamental transformation: from a relatively predictable world to a more vulnerable world." IMF President Georgieva said that from now until 2026, the losses from the global economic slowdown are expected to reach $4 trillion.
Director of the School of Economics of Fudan University Zhang Jun pointed out that it has become a consensus to remain pessimistic about the prospects of the world economy, and there are several main reasons. First, geopolitical factors. The Russian-Ukrainian conflict triggered the energy crisis, and the world economy faced a greater risk of recession. Second, developed countries have not yet emerged from the inflation shadow caused by the expansion of monetary policy during the epidemic. Under the current situation, hiring through to curb inflation will not cause less damage to the future economy than inflation itself. Third, China and other economies are still recovering due to the epidemic.
Vice Chairman of Shanghai International Economic Exchange Center Xu Mingqi pointed out that this is the fourth time this year the IMF has lowered its economic expectations for next year. The main reason is that the overall economic outlook of the West is not optimistic. The high inflation in the United States and Europe did not decline as quickly as expected. The inflation rate in the United States fell to 8.3% in August, but it still maintained a 40-year high; the inflation rate in the EU further rose to 10.1% in August, and the UK maintained a high of 9.9%. The European and American central banks will further raise interest rates, which will have a contractional adverse impact on investment and consumption. The outside world predicts that the United States and Europe will enter negative growth in the fourth quarter of this year and experience economic stagflation.
However, both analysts mentioned that compared with some major international investment banks and financial institutions, the IMF's forecast this time is relatively conservative and not so pessimistic. "The IMF will maintain its growth expectations for this year at 3.2%, which unexpectedly shows that it is relatively optimistic about the overall situation this year," said Xu Mingqi.
chain reaction?
From the perspective of regions and countries, the IMF mentioned that the scope of the economic slowdown is very wide, and economies that account for one-third of the global economy will shrink in the next two years.
For the United States, due to the tightening of the monetary and financial environment, the IMF lowered its growth forecast for this year to 1.6% from its July forecast of 2.3%, and its growth forecast for next year remained unchanged at 1.0%.
Europe, affected by the energy crisis, the economy is expected to grow only 0.5% next year, down 0.7 percentage points from the July forecast. Among them, Germany and Italy are expected to fall into recession. However, the IMF has raised the economic growth rate of euro this year by 0.5 percentage points to 3.1%.
In terms of emerging markets and developing economies, it is expected to grow by 3.7% this year and next year, up by 0.1 percentage point and down by 0.2 percentage points respectively from previous forecasts. At the same time, the IMF expects China's economic growth rate to be 3.2% and 4.4% in the next two years, down 0.1 and 0.2 percentage points from July.
IMF reminds that the economic slowdown in developed economies may trigger a chain reaction, and the external environment is posing challenges to emerging markets and developing economies.
At the same time, the IMF's Global Financial Stability Report released on the 11th pointed out that the world is experiencing stubborn high inflation that has not been seen in decades (the global inflation rate will reach a peak of 8.8% at the end of the year), and will remain high for longer than expected; global financial stability is facing challenges and the market environment is cloudy.
Public opinion believes that this is also the embodiment of the chain reaction in the financial market. Against the backdrop of liquidity tightening, stubborn inflation, and continuous interest rate hikes in central banks across the country, the U.S. stock market has experienced a cruel year, global bonds entered a bear market, and the US dollar hit a 20-year high. Some emerging market economies are the first to be brutal, and financial turmoil may be on the verge of breaking out.
In this regard, Zhang Jun pointed out that some emerging markets and developing economies generally have a high degree of dependence on international capital. After the Federal Reserve raises interest rates, a large amount of capital returns to the United States, causing a huge contraction impact on these countries. As for China, the impact has been very small in this regard. China's economic growth slows down, mainly at the price paid to prevent the spread of the epidemic on a large scale.
"The world economy is connected, and the policy linkage and mutual influence between countries are becoming increasingly greater." Xu Mingqi pointed out that the economic impact of developed economies on developing economies is mainly reflected in two ways.
First, the sharp hike of interest rates in the Federal Reserve and the sharp appreciation of the US dollar exacerbated the turmoil in the financial market, resulting in some economies' capital outflow, thus facing the risk of depreciation of local currency and foreign debt defaults. If you have serious financial bubbles, it may trigger financial crises, such as Sri Lanka , Argentina .
Second, as the main terminal commodity consumption market, the weak economic growth of the United States and Europe will lead to a decline in exports in many developing economies and drag down economic growth. From this perspective, when formulating monetary policies, developed countries need to consider possible impacts and spillover effects , and should not only focus on their own countries. If the global economy is severely impacted, it will in turn back the developed countries themselves and affect the effectiveness of their policy adjustments.
Form a joint force
The shadow of "global recession" is looming, how should countries avoid the "worst moment"?
commented that in the context of the continued Russian-Ukrainian conflict and rising international environmental uncertainty, countries have few countermeasures to stimulate the economy and the risks are not small. If there are monetary and fiscal policy mistakes, the global financial environment deteriorates, the US dollar continues to strengthen, and the unexpected rise of commodities , etc., the global economy may further shrink next year.
Judging from the IMF's statement, it put forward several priority directions to policy makers in various countries: controlling inflation, formulating responsible and targeted fiscal policies, and jointly supporting emerging markets and developing economies.
Xu Mingqi pointed out that at present, most countries around the world are facing imported inflation. Most developing economies face more difficult policy choices than developed economies, which not only raise interest rates to curb inflation, but also face greater pressure on economic growth and stable employment.Therefore, policy makers need to weigh the pros and cons and introduce relatively optimized policy combinations; it is also necessary to strengthen coordination and cooperation between global economic governance and policy at the international level.
"In recent years, rounds of problems have erupted around the world, fundamentally caused by geopolitical divisions." Zhang Jun pointed out that in the past, globalization has been continuously promoted, and developing economies and developed economies have complementarity, and work together to achieve mutual benefit. However, in recent years, as the United States has politicized and instrumented the world economy, international cooperation has been divided, and mutual trust has been shaken, all countries lack the interest and willingness to cooperate, making it difficult for global economic governance to form a synergy.
"Former Federal Reserve Chairman Bernanke once said that the problems encountered by the US economy should be answered from the perspective of being a part of the world economy. Today, this principle is more applicable." Zhang Jun said that the problems encountered by the United States and Europe in all aspects such as alleviating energy shortages, controlling inflation, and restoring the economy have exceeded the level that can be alleviated by a one-country policy, and more effective international cooperation is needed, especially a big country like China. If all countries work together, just like the United States encountered a financial crisis and China played an important role in the global economic recovery, then many problems can be solved.
Looking to the future, the two analysts pointed out that they hope that the international community can form more cooperation opportunities at the geopolitical level, reverse the situation where cooperation between major powers has been blocked in the past few years, and jointly maintain the stable growth of the world economy.
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