Continuous inflationary pressure and higher interest rates will remain the main problem for the global economy next year, together with the overriding concern about longer-term growth prospects, the managing director of the International Monetary Fund told Croatian state broadcaster HRT on Sunday.
“The shocks that have hit us, COVID, Russia’s war in Ukraine, they have created a tough environment. Not only are we struggling with high inflation and slowing growth but with exceptional uncertainty… The biggest concern we have is the longer prospects for growth. We project only 3% growth over the next five years,” said Kristalina Georgieva, who had taken part in an international financial conference in Croatia at the weekend
She said the war in Ukraine played a major role, including the eradication of “the peace dividend we’ve enjoyed for the last 30 years.”
“Defence spending is rising, which leaves less money for development and growth and for helping poorer countries,” Georgieva said.
Talking about growth rates, she said this year’s global GDP growth forecast was 2.8%, compared to 3.4% for last year.
“More troubling, inflation is persistent. We do see the impact of tighter financial conditions on somewhat trending down headline inflation but core inflation is very stubborn and that means interest rates will have to be higher for a longer time,” she said.
“Although there will be some progress, inflation will still be too high for comfort. As for interest rates, through this year and next, at least, we will have to be ready for higher interest rates. The good news is that the conversation moved from ‘how high’ to ‘for how long’”.
For the global economy, she warned, this will impact investment and consumption while we are already seeing a rise in global poverty, and we expect challenging times ahead for the next few years.
Source: www.euractiv.com
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