Among the main threats to economic growth, the first deputy managing director of the IMF, Gita GopinathHe told Reuters the war in Ukraine could escalate, adding: “There could be sanctions and counter-sanctions.”
Gopinath said in an interview on the sidelines of the World Economic Forum in the Swiss resort of Davos that the other challenges include inflation, a tightening of interest rates by central banks and a slowdown in Chinese growth.
“So all of this provides downside risks to our forecast,” Gopinath said, referring to the IMF’s 2022 growth projection issued last month of 3.6%, which had already been downgraded from an estimate of 4. 4% in January.
“I would say that at 3.6% there is a cushion,” he said, admitting, however, that the risks are uneven around the world.
“There are countries that are being hit hard…countries in Europe that are being hit hard by the war, where we could see technical recessions,” he added.
Gopinath assured that inflation “will remain significantly above central bank targets for some time,” adding that it is “very important that central bankers around the world treat inflation as a clear and present danger, that is something that must be tackled in a very forceful way.”
“Financial conditions could tighten much faster than we’ve already seen. And growth in China is slowing.”he added.
The US Federal Reserve is leading the charge among the largest central banks, with two rate hikes so far this year. Its second increase, with half a percentage point, was the highest in 22 years. And at least two more of that size are expected at upcoming meetings.
“What is very important is that the Fed looks at the data carefully and responds at the scale necessary to handle the incoming data,” Gopinath said. “So if it turns out that inflation is especially wide … it’s going even higher, they may need to react more strongly.”
By Alessandra Galloni, Reuters Agency
Source: Ambito
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