IMF chief warns inflation poses ‘clear and present danger’ to global economy

The head of the International Monetary Fund warned this week that Russia’s invasion of Ukraine has weakened economic prospects for much of the world and that skyrocketing inflation poses a “clear and present danger” to the global economy.

IMF Managing Director Kristalina Georgieva said on Thursday the Washington-based institution would cut its growth outlook for 143 economies – representing about 86% of total economic output worldwide – in 2022 and 2023 following the war in Ukraine, which and the highest energy prices in the world.

YELLEN FLEXES MUSCLE IN RUSSIA FIGHT, WARNS NATION AGAINST BLOCKING SANCTIONS

She said the conflict, which is Europe’s worst in decades, has sent “shockwaves” around the world, dealing a heavy blow to countries still recovering from the COVID-19 pandemic. 19.

IMF Managing Director Kristalina Georgieva

IMF Managing Director Kristalina Georgieva speaks during a press conference on March 4, 2020 in Washington. (Samuel Corum/Getty Images/Getty Images)

“The root cause of what we face today is war, and it is war that must end,” Georgieva said in a speech at the Carnegie Endowment for International Peace in Washington. “In economic terms, growth is down and inflation is up. In human terms, people’s incomes are down and hardship is up.”

Georgieva also sounded the alarm that Western sanctions imposed on Russia reflect a world order that has already been “severely damaged” and could further exacerbate the “fragmentation of the global economy into geopolitical blocs”.

The United States and European nations have targeted Russia with harsh financial sanctions designed to cripple its economy after the February 24 invasion of Ukraine. The sanctions include removing a key part of Russia’s Central Bank by preventing it from selling dollars, euros and other foreign currencies from its reserve stock of around $630 billion; block certain financial institutions from the Swift messaging system for international payments; and sanctioning many Russian lawmakers and elites who have close ties to Vladimir Putin.

inflation

People shop at a supermarket in Glendale, California on January 12, 2022. (Robyn Beck/AFP via Getty Images)/AP Newsroom)

The United States has also ordered a ban on Russian oil imports in addition to blocking new investment in the country.

In the United States, the fallout from the war exacerbated already spiraling inflation. The Labor Department reported Tuesday that consumer prices rose 8.5% in March from a year earlier, the fastest pace since December 1981.

GET FOX BUSINESS ON THE ROAD BY CLICKING HERE

The IMF expects inflation, which Georgieva called a “clear and present danger” to the global economy, to remain high for longer than expected. Soaring prices, which are forcing central banks around the world to raise interest rates in an effort to cool consumer demand, will likely slow economic growth in the process.

This amounts to a “massive setback for the global recovery”, Georgieva said.

Leave a Comment