International Monetary Fund's (IMF) Managing Director Kristalina Georgieva said in an interview with CNBC-TV18 on September 9 that “global inflation is more stubborn than was expected”.
Speaking about whether the world is now staring at a recession, the IMF chief said: “What I can tell you is that inflation has proven to be much more stubborn than we thought it would be because of the triple crisis – pandemic, war, and then cost of living – a crisis that fuels inflation from its end by people demanding more compensation.”
She added: “So it is of paramount importance that central banks strive to achieve a place where the stability of the prices signals is secured again, which can be achieved by tightening and raising interest rates (which would end up strengthening the dollar and depreciating other currencies). However, this would impact growth negatively.”
Notably, the IMF has cut the global GDP forecast by 70 bps to 2.9 percent in 2023 and pointed out that the estimates have a downside risk associated with them
Georgieva pointed out: “Since we issued our last forecast, in the second quarter, the world economy shrank by two percent.”
She added: “India, by the way, is performing well on a quarter-by-quarter basis registering over 13 percent growth. But even India is underperforming vis-a-vis the original projections.”
“What does this mean for 2023? This means that the slowdown will translate into recession in some countries… It is early to say whether it would be world spread recession, but I can tell you for many countries even if they are in positive growth territory it would feel like a recession if we are to just project the factors I described,” the IMF MD cautioned.
She further said: “Let’s remember that mother nature this year has shown that we have been complacent for far too long … that would mean that harvest for next year may be lower and pressure on food prices may remain quite strong.”
(With inputs from agencies)