MercoPress. South Atlantic News Agency

World Bank, IMF heads foresee recession ahead

Malpass and Georgieva’s remarks came in a live-streamed discussion

The planet must prepare itself for a full-size recession, according to forecasts announced Monday by the heads of the International Monetary Fund (IMF) and the World Bank, who spoke of economic headwinds ahead.

“There’s the risk and the real danger of a world recession next year. The advanced economies are slowing in Europe and so we’ll see where it goes into next year,” World Bank Group President David Malpass told IMF Managing Director Kristalina Georgieva during their discussion.

“But the currency depreciation means that the debt levels for the developing countries are getting more and more burdensome,” he added.

“The rise in interest rates puts added weight on it. And inflation is still a major problem for everyone, but especially for the poor,” he also pointed out.

Georgieva said that one-third of the world’s economy will have had at least two consecutive quarters of negative growth this year, with the slowdown costing some US$4 billion to the global economy between now and 2026.

“We are seeing slow down in all three key economies of the world,” she said. “Eurozone, because primarily of gas prices shooting up. China, because of COVID disruptions and the volatility of the housing sector, we see a very significant problem in China dragging down growth,” she also noted.

“And in the United States, still very strong labor market, but also losing a bit of momentum because interest rates are starting to bite,” she stressed.

“This would mean that the global economy will lose a GDP, which is equal to the GDP of Germany,” she also explained.

Malpass and Georgieva’s remarks came in a live-streamed discussion on the eve of the start of the autumn session of the IMF and WB governing bodies as the Federal Reserve keeps raising interest rates to slow down inflation.

“There's risk in real danger of the world recession next year. Some of the advanced economies are slowing in Europe. So, we'll see where it goes into next year,” Malpass said.

“I very much agree with you that the risk of recession has gone up,” Georgieva stressed.