According to the estimates of the head of the IMF, The division of the world into “two trading blocs” will cause the global economy to lose US$1.4 trillion, equivalent to “1.5% of the Gross Product.”
The outlook is bleaker for Asiawhich could lose more than 3% of GDP as it is a region that is more integrated into the global value chain; although it indicated that it is better equipped to withstand economic shocks by having significant reserves and cooperation between countries.
The vision of the Fund coincides with that of the World Trade Organization (WTO). In a report issued last month, the agency’s managing directorNgozi Okonjo-Iwealastated that “although trade restrictions may be a tempting response to the supply vulnerabilities revealed by the shocks of the past two years, a tightening of global supply chains would only aggravate inflationary pressures, leading, with the time, to a slowdown in economic growth.
Beyond sanctions and trade restrictions, For Georgieva, the main factor impacting world growth is the war between Russia and Ukraine. “The most damaging factor for the world economy is war. The sooner it’s over, the better.”said the head of the IMF.
The IMF has already cut its growth prospects in the world on various occasions this year: in October reduced the expansion forecast for 2023 to 2.7%, far from the 3.8% estimated last January.
In fact, calculations predict that a terce of the world economy will record at least two consecutive quarters between this year and next. One of the great consequences of the war, he pointed out, is theinflation and appreciation of the dollar that fully affect developing and emerging countries.
In the case of dollarits appreciation motivates the investors redirect their funds to safer assets, hand in hand with prospects and signs that the world economy is heading towards a recession. “If we add to this the fragmentation in the world economy is like throwing gasoline on a fire. No one benefits from it,” Georgieva reiterated.
Consulted for the risk of default sovereign debt in developing countries, the agency’s director stated that the IMF “is not yet alarmed but is on alert.”
According to the IMF, about 25% of emerging markets are in debt distress, a figure that rises to 60% in the case of low-income countries. Georgieva recommended that these countries, impacted by the rise in the cost of debt denominated in dollars, to take shelter and seek early assistance from the IMF itself.
Egypt, Jordan, Pakistan, Mauritania and Bangladeshare some of the nations that recently resorted to the assistance of the Fund, impacted by the debt and the shortage of reserves.
For his part, in the case of European countries, for the head of the Fund “the impact of the war is significant”, and estimated that “Half of the European Union may find itself in recession next year”.
Source: Ambito
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