(Washington) The year 2023 could be a year marked by social tensions at the global level, worried Thursday the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, while the effect of the financial tightening on the job “is yet to come”.
“We are only on January 12 and already have (illustrations) in Brazil, Peru, Bolivia, Colombia, the United Kingdom, all for different reasons, but with very clear social tensions”, recalled Mme Georgiava.
However, if the rise in rates were to end up having an effect on the job markets, a logical consequence of the objective of slowing down, this could result in additional tensions, warned the boss of the international institution.
Especially since the situation is not about to improve, due to “inflation which remains tenacious” and in the face of which “the work of the central banks is not yet finished”, recalled Mr.me Georgieva, implying at the same time that “the crisis is probably not over”
Although the economic slowdown should be greater in 2023 than envisaged by the Fund in its last publications last October, national labor markets have so far shown “showing resilience”, underlined Ms.me Georgieva, “which is a positive point”.
This is mainly due to “the fact that governments have acted quickly to provide financial support to populations in the face of rising food and energy prices. But the available space is shrinking”.
“As long as people have work, even if prices are high, they consume, which helped the economy in the third quarter, particularly in the United States and Europe, but we know that the impact of the tightening is coming” in terms of unemployment, insisted the boss of the IMF.
At the same time, the impact of rising rates on indebted countries will also be dramatic, Ms.me Georgieva, whose institution has been warning for several months of the risk of seeing around 60% of emerging and developing countries slip into a sovereign debt crisis.
The Avoidable Global Recession
“For countries with a high level of indebtedness and whose issues are denominated in dollars, the effects (of monetary policies, editor’s note) are dramatic. And when a devaluation is added in the countries concerned, this leads to significant difficulties for the populations”, detailed the managing director of the IMF.
The opportunity to recall the need to quickly restructure the debt of these countries, a subject on which “we must have a meeting in February at the highest level, with the main creditors, China, India, Saudi Arabia, as well as the private sector” .
Nevertheless, the IMF still believes that “a global recession can be avoided” even if a certain number of countries should see a decline in their GDP, at least “if there is no additional shock”, recalled the general manager.
Especially in the event that China does not question its change of policy vis-à-vis the pandemic, when an economic recovery in the country from the middle of the year “could be the most major global growth driver for 2023,” added Mr.me Georgiava.
“If they stay on their trajectory, China will again become a positive contributor to global growth, even if it will no longer be in the proportions observed so far,” she insisted.
On the other hand, the resilience of the American economy makes it possible to avoid a plunge at the global level, noted the boss of the IMF.
“What we are seeing in the United States is quite remarkable”, she added, pointing to particularly low unemployment and consumption which remains buoyant, “we are also seeing a shift in spending from goods to services”, which supports activity.
“It makes it possible to envisage the fact that the United States should be able to avoid recession. And in the event that they experience a technical recession, it should remain light.