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IMF Believes That Outlook For Growth Was Becoming Gloomier At A Time

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The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, believes that the possibility of the formation of competing economic blocs exists. Kristalina Georgieva made an appeal for cooperation on Wednesday while delivering a video-link address at the Brussels Economic Forum during a period of historically low global growth.

She thinks that geo-economic fragmentation, which might add more “cold water” to already sluggish global growth, is on the verge of happening in the world. The world could break into competing economic blocs after decades of increased global integration, the IMF director warned. And that is a scenario that would be detrimental to everyone, even Europeans.

She issued a warning that the outlook for growth was becoming gloomier at a time when the long- and short-term outlooks for the world were both negative. The IMF predicts that during the next five years, growth will stay at approximately 3%, which is the lowest medium-term prediction in more than three decades.

Georgieva noted that until stubborn inflation is effectively under control, central bankers “cannot take their eyes off the ball.” Growth is being hampered and some financial vulnerabilities are being exposed by the necessary monetary tightening.

The official cautioned that trade fragmentation might cost the global economy up to 7% in the long run, stressing that multilateral cooperation must be revived for long-term prosperity everywhere.

According to her, that is “roughly equivalent to the combined annual output of Germany and Japan,” and if technological decoupling is taken into account, some countries could experience GDP losses of up to 12%.

The head of the IMF had earlier stated that the recent shocks, such as the Covid epidemic, the crisis in Russia and Ukraine, and the rise in interest rates following years of lax monetary policy, have been a drag on the world economy.

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