The Way Forward: Responding to Global Shocks in a Time of Uncertainty

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A conversation between IMF Managing Director Kristalina Georgieva and World Bank Group President David Malpass.

These Spring Meetings are taking place in the shadow of war in Ukraine and rising global challenges due to conflict, COVID-19, and climate change. The catastrophe in Ukraine is disrupting lives and creating shocks from reduced food supplies and increasing fuel costs, magnifying inequality by putting additional pressure on the most vulnerable. Due to the war, countries are also facing rising debt, inflation, and reduced market access, exacerbating the setbacks already experienced due to the pandemic.

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The global economy is suffering a major setback. On top of the still lingering effects of the pandemic, the war in Ukraine is a major shock that is reverberating across the world. In these times of extreme uncertainty, it is more important than ever for policymakers around the world to come together to address the multiple challenges.

Key Points:

  • Spillovers from the war. The war has resulted in a humanitarian crisis and its impact stretches across continents leading to a reduction in global economic growth, upward pressure on energy and food prices, and food insecurity. Central Asia and the Caucasus, are particularly impacted given their proximity to Ukraine, while Europe, dependent on Russian energy, is also experiencing a significant impact. Other regions, including the Middle East and Africa, are also vulnerable to adverse effects, including from higher food prices.
  • Rising inflation. The combination of rising inflation in advanced economies with high debt levels in many developing countries poses a challenge for policymakers and requires a concerted effort. Georgieva noted that rising inflation has become a clear and present danger for many countries. Finding a way to address inflation while minimizing the spillovers to other countries is key. Malpass called on advanced economies to step forward with food aid and increase the supply of food, fertilizers, and energy. Georgieva recommended countries open their markets to allow for a wider inflow of goods, which could help global growth.
  • Debt. Debt-related vulnerabilities are growing. Malpass emphasized that the debt burden must be reduced substantially. Georgieva underscored the need for predictable processes to address high debt and urged G20 to make the Common Framework even more impactful.

Quotes:

The debt problem is knocking on the door louder and louder. Let’s get serious about the Common Framework.Kristalina Georgieva

One aspect we are concerned about is the reversal in education. The shutdown affected both boys and girls, but as schools reopen, we are seeing fewer girls are returning to school.David Malpass

Spillovers [from the war] are more painful for countries that were further behind in the recovery.Kristalina Georgieva

For poorer countries and people, who spend more of their income on food, rising prices really hit them.David Malpass

Contributor: Maria L. Guerra Bradford