IMF chief: China’s economic forecast will be sharply lowered

International Business News  –  International Monetary Fund (IMF) Managing Director Kristalina Georgieva gave a joint interview with Nikkei  and TV Tokyo on July 20, saying that due to the historic currency Influenced by inflation and other influences, “the risk of recession in the world economy is strengthening”, and said that it will lower the world economic growth outlook released on July 26 compared with April. Countries will take into account the economy while dealing with inflation, but due to the confrontation between the United States, Europe and Russia, cooperation is difficult to carry out. The world economy is facing significant risks.

The IMF publishes its world economic outlook on a quarterly basis. For the 2022 real growth outlook through April, it said the world will be 3.6%, a sharp slowdown from 6.1% the previous year.

A downward revision in July would be the third consecutive downward revision following January and April 2022. In response to the new growth rate outlook, Georgieva said that both 2022 and 2023 would “maintain growth at the baseline”, while indicating further downside risks.

Georgieva cited rising global inflation and the accompanying rapid monetary tightening as reasons for the downgrade. In addition, the increased repayment burden of dollar-denominated debt and the slowdown of China’s economy caused by the appreciation of the dollar have also become a heavy burden on the world economy.

To avoid a recession, Georgieva called for the need for coordination of monetary and fiscal policy. If the fiscal support is a money-spending policy that does not target the poor, etc, inflation will increase as demand is stimulated, indicating that “further monetary tightening will eventually be required.”

Georgieva also pointed to the seriousness of the situation facing developing countries and emerging market countries, saying that “60% of low-income countries will have a debt crisis or a state close to it”. Sri Lanka’s parliament, already in deep economic crisis, elected a successor to the resigned president on the 20th. Georgieva said, “Our team will go to the country as soon as a government that can start dialogue is formed,” and expressed her intention to cooperate with the new regime.

Regarding China, Georgieva said that “the growth rate will be significantly reduced again”, expressing the view that in addition to the closure of the city caused by the expansion of the epidemic, the downturn in the real estate market will also be a drag.

Japan, which has seen its inflation rate rise to around 2 percent due to high crude oil prices, said, “considering the global economic slowdown, the inflation rate will fall below 2% again.There is no change in the fact that the Bank of Japan’s monetary easing is the right choice,” citing the inability to achieve the 2% inflation target for a sustained period.

In response to the depreciation of the yen, Georgieva said that “it only reflects the fundamentals of the economy”. Regarding the foreign exchange intervention of the Japanese government to buy yen and sell dollars to curb the depreciation, she believes that “it should not be implemented at present.”

Regarding the current situation that Japan’s wages and prices are not easy to rise compared with other major countries, Georgieva pointed out that “it is important to improve production efficiency and improve the value of labor”, saying that labor market constraints are inhibiting economic growth, and calling for improve. In particular, the 25 per cent gap in wages between men and women is seen as a problem.