AGL 40.40 Increased By ▲ 0.20 (0.5%)
AIRLINK 129.25 Increased By ▲ 0.14 (0.11%)
BOP 6.81 Increased By ▲ 0.21 (3.18%)
CNERGY 4.13 Increased By ▲ 0.10 (2.48%)
DCL 8.73 Increased By ▲ 0.28 (3.31%)
DFML 41.40 Increased By ▲ 0.15 (0.36%)
DGKC 87.75 Increased By ▲ 0.75 (0.86%)
FCCL 33.85 Increased By ▲ 0.50 (1.5%)
FFBL 66.40 Increased By ▲ 0.50 (0.76%)
FFL 10.69 Increased By ▲ 0.15 (1.42%)
HUBC 113.51 Increased By ▲ 2.81 (2.54%)
HUMNL 15.65 Increased By ▲ 0.42 (2.76%)
KEL 4.87 Increased By ▲ 0.09 (1.88%)
KOSM 7.62 Decreased By ▼ -0.21 (-2.68%)
MLCF 43.10 Increased By ▲ 1.20 (2.86%)
NBP 61.50 Increased By ▲ 1.00 (1.65%)
OGDC 192.20 Increased By ▲ 9.40 (5.14%)
PAEL 27.05 Increased By ▲ 1.69 (6.66%)
PIBTL 7.26 Increased By ▲ 1.00 (15.97%)
PPL 150.50 Increased By ▲ 2.69 (1.82%)
PRL 24.96 Increased By ▲ 0.40 (1.63%)
PTC 16.25 Increased By ▲ 0.01 (0.06%)
SEARL 71.30 Increased By ▲ 0.80 (1.13%)
TELE 7.25 Decreased By ▼ -0.05 (-0.68%)
TOMCL 36.29 Decreased By ▼ -0.01 (-0.03%)
TPLP 8.05 Increased By ▲ 0.20 (2.55%)
TREET 16.30 Increased By ▲ 1.00 (6.54%)
TRG 51.56 Decreased By ▼ -0.14 (-0.27%)
UNITY 27.35 No Change ▼ 0.00 (0%)
WTL 1.27 Increased By ▲ 0.04 (3.25%)
BR100 9,967 Increased By 125.2 (1.27%)
BR30 30,751 Increased By 714.7 (2.38%)
KSE100 93,292 Increased By 771.2 (0.83%)
KSE30 29,017 Increased By 230.5 (0.8%)
Business & Finance

Full brunt of financial tightening yet to materialize: IMF

  • IMF chief Kristalina Georgieva says central banks have some way to go in their inflation battle
Published January 13, 2023
Photo: REUTERS
Photo: REUTERS

WASHINGTON: Countries have yet to see the full impact of tightening financial conditions, IMF chief Kristalina Georgieva said Thursday, warning that central banks have some way to go in their inflation battle.

Global growth is expected to slow further this year, as central banks including the US Federal Reserve have raised interest rates to cool surging prices.

While sectors like housing have been reeling in the United States for example, the labor market remains strong with low joblessness.

Inflation remains stubborn, and in that sense, the job of central banks is not yet done: IMF chief Kristalina Georgieva

“As long as people are employed, even if prices are high, consumers spend…. But we all know that the impact of tightening financial conditions is yet to bite, in terms of unemployment,” Georgieva told reporters in a briefing on the world economy.

“Inflation remains stubborn, and in that sense, the job of central banks is not yet done,” she said.

This suggests central banks may need to continue hiking interest rates, walking a fine line between easing demand and avoiding tipping economies into recession.

Doing so comes with risks, and Georgieva stressed the need to watch how tightening conditions hit the labor market and possibly translate into “more tensions between employers and workers.”

Governments have been quick to provide policy support thus far, adding a buffer between consumers and surging food and energy costs, but this policy space is “shrinking,” she cautioned.

Bottoming out

The International Monetary Fund also expects the global slowdown to “bottom out” towards year-end, and for the world economy to trend towards a higher growth trajectory in 2024, Georgieva said.

The IMF maintains that a “global recession can be avoided” even if some countries see downturns.

But this is subject to an absence of negative shocks like growing social unrest and spillovers between countries, climate events, or a worsening in Russia’s invasion of Ukraine.

“We are now in a more shock-prone world,” she said.

While tighter financial conditions will have a “dramatic” impact on countries with high debt levels, Georgieva said the IMF does not see a “systemic debt crisis on the horizon.”

She added that a new global sovereign debt roundtable is set to meet for the first time in February, on the sidelines of a Group of 20 finance officials meeting, bringing key creditors and private finance together.

‘Stay the course’

Weighing in on specific countries, Georgieva noted that China needs to “stay the course” in reopening from nearly three years of a strict zero-Covid policy that has battered business activity.

China’s rebound from its latest surge in coronavirus cases since recently lifting lockdowns, quarantines and mass testing would have significant implications globally, she said.

The world’s second biggest economy used to deliver up to 40 percent of world growth.

If so, it could turn into a “positive contributor” to average global growth by mid-year or thereabouts, she added.

Meanwhile, Georgieva expressed optimism over “remarkable” market resilience in the United States, with Covid-era support helping consumer demand in the world’s biggest economy.

“It gives some… expectation that the US would avoid falling into a recession,” she said, adding that a potential downturn will likely be very mild.

“For now, the dynamic seems to be more indicative for a soft landing,” she said.

Also read:

Comments

Comments are closed.

Syed Fakhar Abbas Jan 13, 2023 03:59pm
@Zaryab khan, yes of course that is what realism say to us that, First state and it's benefits then other.
thumb_up Recommended (0)
Syed Fakhar Abbas Jan 13, 2023 04:00pm
Of course we need Realism in this international political Arena
thumb_up Recommended (0)