What are the most pressing issues facing the global economy right now? This formed the theme of a panel discussion yesterday at the ongoing IMF/World Bank Spring Meetings in Washington DC, USA. The IMF’s Kristalina Georgieva, European Central Bank President Christine Lagarde, US Federal Reserve Chair Jerome Powell, Indonesia’s Minister of Finance Sri Mulyani Indrawati, and Prime Minister of Barbados Mia Mottley discussed the impact of the war in Ukraine and other challenges in a debate on Thursday.
According to Georgieva, “We live in a more shock-prone world” and need to be more agile and build more resilience. She further highlighted the challenge that emerging markets and developing economies face, with growth projections that are 6 percent below their pre-pandemic trend in 2026—meaning that they face a delay of 2 or more years in their recovery. The issue for leaders is to find policies that can deal with short-term challenges without jeopardizing longer term sustainable growth, she said.
Lagarde emphasized that there will be a “haircut to growth projections and rise in inflation numbers,” but added that the war will have ripple effects that go way beyond Europe.
Powell said that while the US economy is very strong, restoring price stability is essential, and the key focus will be bringing inflation back to the 2 percent target.
Mottley said that small countries such as Barbados don’t have the option of fiscal and monetary relaxation to support their economies—their only option is to increase debt. This limits the space to fight inflation. “This is a time when we need expenditure more than ever, and there is little concessionary funding available, little fiscal space available, and an urgent need to reform international financial institutions.