The global economy is being pushed to the edge of a precipice with crisis after crisis.
At the first World Economic Forum to be held in person since 2020 in Davos, Switzerland, on Monday, the International Monetary Fund said the economy faced “perhaps its biggest test since World War II”.
“We face a potential confluence of calamities,” International Monetary Fund (IMF) Managing Director Kristalina Georgieva said in a statement.
She warned that Russia’s invasion of Ukraine has “aggravated” the effects of the Covid-19 pandemic, weighing on the economic recovery and stoking inflation as food and fuel costs rise.
Rising interest rates are increasing pressure on countries, companies and households with large amounts of debt. Market turmoil and ongoing supply chain constraints also pose a risk.
And then there’s climate change.
The head of the International Energy Agency (IEA) urged countries to make the right investment choices in response to fossil fuel shortages triggered by Russia’s attack on Ukraine.
“Some people may use the Russian invasion of Ukraine as an excuse to […] a new wave of investment in fossil fuels,” IEA chief Fatih Birol said during a discussion in Davos. “This will forever close the door to achieving our climate goals.”
The scale of the economic challenge was underscored by a new OECD report on Monday, showing that the combined GDP of the G7 countries shrank by 0.1% in the first quarter of the year, compared with the previous three months.
To limit economic stress, the IMF is urging government officials and business leaders to meet in Davos to discuss lowering trade barriers.
But as countries grapple with growing dismay over the cost-of-living-at-home crisis, some are going in the opposite direction, implementing restrictions on trade in food and agricultural products that could exacerbate shortages and drive up prices around the world. .
Earlier this month, India’s decision to ban wheat exports drove up the price of the grain, even though it is a relatively small exporter. Indonesia banned most palm oil exports in April to protect domestic supplies, but will lift the ban this week.
In an interview during a visit to Tokyo, President Joe Biden said on Monday that a recession is not inevitable and reiterated that the White House is considering removing some Trump-era tariffs levied on Chinese goods, which Treasury Secretary Janet Yellen said they do more harm than good to American consumers and businesses.
Meanwhile, China could see its economy shrink this quarter because of the impact of Covid-19 lockdowns in Shanghai, Beijing and dozens of other cities, and the fallout from a housing crisis. The country’s central bank on Friday delivered the biggest cut on record to an interest rate following the collapse in home sales.
Zhu Ning, a professor at the Shanghai Advanced Institute of Finance, said he believed officials still had ample options to address the array of challenges facing the world’s second-largest economy.
“China still has a lot of room, if it wants to, to lower interest rates, give monetary stimulus to the economy,” he said.
With input from Anna Cooban, Michelle Toh, Mark Thompson and Allie Malloy.
Source: CNN Brasil
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