FDMD Remarks at the Caixin Global Summit 2022

IMF News, November 17, 2022

Source details

Global growth projected to slow from 6.0 percent last year to 3.2 percent this year.
2023 global growth forecast lowered to 2.7 percent—0.2 percentage points lower than projected a few months earlier in July.
Expectation that the slowdown will be broad-based, with countries accounting for a third of the global economy contracting this year or next.
One in four chance that global growth next year could fall below 2 percent.
Many people may experience 2023 as recessionary; some major economies (such as Germany) are expected to enter recession next year.
Outlook for largest economies:
- United States: tightening monetary and financial conditions could be about 1 percent in 2023.
- China: next year’s growth forecast lowered to 4.4 percent due to a weakening property sector, continued lockdowns and weaker global demand.
- Euro-area: growth projection for 2023 reduced to 0.5 percent due to the energy crisis caused by the war.

Global inflation now expected to peak at 9.5 percent in 2022 before decelerating to 4.1 percent by 2024.
Inflation pressures are broader and more persistent than anticipated, broadening beyond food and energy.
Central banks are focused on restoring price stability; the pace of tightening has accelerated sharply.
The strength of the dollar is at its strongest since the early 2000s; rise appears mostly driven by fundamental forces such as tightening U.S. monetary policy and the energy crisis.
Appropriate exchange-rate and reserve guidance:
- Calibrate monetary policy to maintain price stability while letting exchange rates adjust.
- Conserve valuable foreign exchange reserves for when financial conditions really worsen.
Where necessary, financial policy should ensure markets remain stable; monetary policy should remain firmly focused on taming inflation.

Four key risks that could worsen the outlook:
- The risk of monetary, fiscal, or financial policy miscalibration has risen sharply at a time of high uncertainty.
- Turmoil in financial markets could cause global financial conditions to deteriorate, and the dollar to strengthen further.
- Inflation could prove more persistent, especially if labor markets remain extremely tight.
- Further escalation of the war in Ukraine could exacerbate the energy and food security crisis.

Emerging market policymakers should urgently improve liquidity buffers and “batten down the hatches.”
Eligible countries with sound policies should consider requesting access to precautionary instruments from the Fund.
The US could reactivate currency swap lines to eligible countries, as it extended at the start of the pandemic, to provide an important safety valve in times of currency market stress.
Too many low-income countries are close to, or already in, debt distress.
- Progress towards orderly debt restructurings through the Group of Twenty’s Common Framework is urgently needed to avert a wave of sovereign debt crises.

Low inflation and weakening growth allow for greater support for vulnerable households; strengthening social safety nets would promote consumption.
Recalibrating the zero-COVID strategy to mitigate its economic impact is critical to sustain and balance the recovery.
In the property sector, urgent action at the central government level is needed to safeguard financial stability.
These actions are described as beneficial both for China’s economic wellbeing and for the world.

Concern that geo-economic fragmentation could undermine the gains from globalization over the longer term.
Trade has been a key driver of growth and integration; trade policy should not become a source of fragmentation.
Call for guardrails to defend existing avenues for global collaboration to make progress on climate policies, debt resolution, and other global issues.
The global community—led by the major economies—must step up to tackle vulnerabilities including climate change, food insecurity, and elevated debt burdens.

Source: Remarks at the Caixin Global Summit 2022, Gita Gopinath, First Deputy Managing Director, IMF; November 17, 2022.