IMF to cut global growth outlook ‘substantially’ at next review.

Rising food and energy prices, slowing capital flows to emerging markets, the ongoing pandemic, and China's slowdown make policymakers' jobs "much more difficult," said Ceyla Pazarbasioglu, the IMF's director for strategy, policy, and review, at a Sunday panel in Bali, Indonesia.

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Surging food and energy prices, slowing capital flows to emerging markets, the ongoing pandemic, and a slowdown in China make it “much more challenging” for policymakers, Ceyla Pazarbasioglu, the IMF’s director for strategy, policy, and review, said at a Sunday panel in Bali, Indonesia. “It’s shocking after shock after shock which is hitting the global economy.”

She spoke after the Group of 20 finance ministers and central bank governors failed to reach an agreement on Saturday, highlighting the difficulty in coordinating a global response to rising inflation and recessionary fears.

In its April report, the IMF reduced its forecast for global growth this year to 3.6 percent, down from 4.4 percent prior to the Ukraine conflict. “We will downgrade our forecast substantially” in a review due this month, Pazarbasioglu said.

Central bankers all over the world are struggling to find the right response to price increases caused by supply issues.

“The path to a soft landing is narrowing; we think it is still a feasible path but certainly not a very easy one,” said Hyun Song Shin, head of research at the Bank for International Settlements, at the same panel. “Where central banks take monetary policy in a rapid and decisive manner and have a front-loaded response to inflation, that is more conducive to a soft landing.”

Bank Indonesia, which is hosting the G-20 meeting, has become an outlier by maintaining its policy rate at a record low. Governor Perry Warjiyo has defended his position, claiming that tightening too soon risks plunging the country, which has just emerged from a pandemic-driven recession, into stagflation.

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