August 13, 2022

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Index – The Economy – The IMF announced what we didn’t want to hear

“If government aid is not properly targeted, the support given to people will put more pressure on inflation, and then monetary policy will need to take more aggressive measures,” Kristalina Georgieva, managing director of the IMF, told Bloomberg. Report According to the IMF official in his report, “monetary policies are tightening, but fiscal policy may inadvertently move in the other direction.” He made his remarks after a meeting with finance ministers of the G20 group.

Officials at the meeting blamed Russia for the difficulties in the global economy. US Treasury Secretary Janet Yellen has estimated that US inflation has halved

This is due to energy costs, for which Russia is directly responsible, he says.

While representatives of other countries added their own reprimands to Moscow, G20 conference participants agreed not to interrupt the meeting when Russian officials spoke – unlike the group’s previous meeting this year.

At the end of the meeting the officers could not agree on a joint statement, so a consensus value statement was issued. This has affected areas like food security and credit crisis.

They promise crisis

“We need to objectively analyze the reason for the rise in inflation,” the IMF chief said. He noted that the effects of the war and the costs related to Covid were recurring events, resulting in disruptions in global production of goods and problems in supply chains. In the case of food, weather shocks increased inflation.

According to Georgieva, in recent months “there has been a growing awareness that the outlook has darkened”, with the IMF already lowering its economic forecast twice this year.

He said there were downside risks due to war, pandemic and financial conditions: “I would remind anyone who wants to listen that two unthinkable events have happened in two years. What’s the guarantee that we won’t have another shock to prepare for?” asked the IMF’s CEO.

About 30 percent of emerging and developing economies are in debt distress, and in the case of low-income markets, the proportion of those in trouble reaches 60 percent.

America is in more and more trouble

As predicted US gross domestic product (GDP) may have contracted in the three months from April to June. Add that to the decline from January to March, and that’s two quarters in a row. According to an oft-quoted rule, that means the world’s largest economy is in recession – although these are not official figures yet.

However, May’s consumption data showed that inflation-adjusted spending and disposable income fell.

This reinforced fears that a recession had now begun. The coming weeks are likely to see a heated debate about the true health of the economy. On the other hand, the question is: is America headed for a recession or is it already there?

(Cover photo: Kristalina Georgieva, International Monetary Fund (IMF) CEO in Berlin on August 26, 2021. Photo: (Clemens Billon/Pool/Getty Images)