IMF warned against global inflation and marked the three stones that hinder economic recovery

“We are facing a global recovery which remains hampered” by the pandemic and its consequences, he said. In this regard, he felt that there are “three stones” in our shoes that prevent us from moving forward: the divergence of recovery, inflation and debt.

Regarding the first problem, he stressed that “economic activity in advanced economies is expected to return to pre-pandemic trends by 2022. But most emerging and developing countries will need several more years to recover. … difficult to avoid financial scars in the long run. “

Inflation

In terms of inflation, he estimated that indices rose rapidly in several countries. He added that “while we expect price pressures to ease in most countries in 2022, in some emerging countries and developing economies, price pressures are expected to persist.”

Georgieva said that the increase in global food prices, which was over 30% last year, was of particular concern. In addition to the rise in energy prices, “this puts more pressure on the poorest families.”

More generally, for the economist “the outlook for inflation remains very uncertain”. And he warned that a more sustained rise in inflation expectations could lead to rapidly rising interest rates and sharply tightening financial conditions.

If this scenario were to occur, it would pose a particular challenge to highly indebted emerging and developing economies.

Finally, he cautioned against growing liabilities, noting that “we estimate that global public debt has grown to almost 100% of GDP… A lot [países en desarrollo] they started the pandemic with very little tax room. They now have even less room in their budgets and very limited ability to issue new debt on favorable terms. “

Faced with this panorama, he affirmed that “strong political action is necessary. From this point of view, he said that if we do not close the “big immunization gap”, “much of the world will remain unvaccinated and the human tragedy will continue.

Calling to “drastically increase the delivery of doses to the developing world”, he warned that if the necessary measures are not taken, the recovery will “slow down” and we could see global GDP losses climb to 5.3 trillion. dollars over the next few years. five years “.

Returning to inflation, Georgieva asserted that central banks can avoid monetary adjustments until price dynamics are clearer, but warned that “they must be prepared to act quickly if the recovery strengthens further. faster than expected, or if the risks of rising inflation expectations become tangible. ”.

The IMF director also called for accelerating the reforms needed to transform economies and identified climate change, technological change and inclusion as priorities.

Finally, and referring to the role of the IMF in the face of the crisis, he recalled that the special drawing rights (SDRs) were distributed for 650 billion dollars – the largest issue in the history of the organization – including about 275 billion went to emerging and developing countries.

In addition, he considered that the impact of the expansion of SDRs can be amplified and in this sense “we call on countries with strong external positions to voluntarily channel their SDRs” so that the resources reach those who have them. Not needed anymore.

It aims to incorporate new SDRs into the Poverty Reduction and Growth Trust Fund, thereby increasing the Fund’s capacity to provide interest-free loans to low-income countries. They also plan to use SDRs to create a new resilience and sustainability trust to help vulnerable low- and middle-income countries.