Washington - (AFP) - The Managing Director of the International Monetary Fund , Kristalina Georgieva, considered in a speech she delivered Thursday in Washington that countries and institutions must move together in the face of the growing risks of recession in all parts of the world.
At the risk of seeing "this period of fragility become a dangerous new normal," Georgieva called for "more will to act now and together."

"There is an urgent need to achieve stability in the economy. (...) In the International Monetary Fund, we call for joint action" between countries with the aim of anticipating crises future.

On Tuesday, the foundation will publish its growth forecast for the coming year, which will be revised downward, Georgieva warned.

The reason is the multiplication of crises that were reinforced by the repercussions of the Russian war in Ukraine and the environmental disasters that struck several regions of the world this summer and led to the destabilization of a global economy that was mainly affected by the Covid-19 epidemic.

She added that the epidemic represented a "fundamental shift for the global economy," as it moved from a "relatively predictable world" to a "world exposed to shocks and greater uncertainty."

As a result, the Foundation now expects that a large number of countries will witness a decline for two consecutive quarters of gross domestic product, which indicates a recession between the end of this year and 2023.

It is a risk that is expected to affect "about a third of the global economy," while "for many families around the world, even if growth is positive, they will have the feeling that they are in stagnation due to the high cost of living," Georgieva added.

And this could be worse: "Uncertainty is very high in a context of war and pandemic. There could be other economic shocks."

Therefore, the most important priority is to prevent prices from continuing to rise, "because far from being fleeting, inflation takes hold."

Thus, central banks are struggling by raising interest rates in order to slow the economy, and failure to act now will require "higher and permanent rates, which will cause more damage to growth and jobs," as the Managing Director of the International Monetary Fund warned.

Kristalina Georgieva joins US Federal Reserve Chairman Jerome Powell in recognizing that lowering inflation "will not be easy and will not be painless in the short term."

However, we must beware of a monetary tightening policy that is "very strong and very fast", especially without coordination, as the Director-General of the International Monetary Fund warned, with the risks of "plunging many economies into a prolonged recession."

The rise of the dollar, as a result of raising the main interest rate of the Federal Reserve, complicates access to loans for many countries that borrow in this currency and whose debts have risen as a result of the rise in interest rates.

"More than a quarter of emerging countries have defaulted on their debts or are in difficulty, as well as more than 60 percent of low-income countries," Georgieva said.

And the danger: a debt crisis that is expanding to reach all of these countries.

"Major lenders like China or the private sector must take responsibility," she said.

It is expected that the economic ministers of the Group of Twenty will meet in Washington, along with central bank governors, on the sidelines of the annual meeting of the International Monetary Fund, next Wednesday and Thursday. They particularly want to make progress on issues of global taxation, regulation of the financial sector, and even financing of infrastructure.

And Georgieva added that if action in the short term was necessary, "it will not be sufficient to revive the global economy," calling for "transformative reforms" that the International Monetary Fund intends to support.

Among the points that must be paid attention to, according to the Director of the International Monetary Fund, "investment in health, education, and stronger safety nets are necessary," as well as digitization and the development of digital infrastructure.

And she concluded by saying, "We must respond to this period of instability, by stabilizing our economies in the face of an immediate crisis and building our stability in the face of future crises."