World Bank President David Malpass and International Monetary Fund Managing Director Kristalina Georgieva warned on Monday of a growing risk of global recession and said inflation remained a continuing problem after Russia's invasion of Ukraine.
"There's a risk and real danger of a world recession next year," Malpass said in a dialogue with Georgieva at the start of the first in-person meetings of the two institutions since the COVID-19 pandemic.
He cited slowing growth in advanced economies and currency depreciation in many developing countries, as well as ongoing inflation concerns.
The IMF chief last week said the global lender would downgrade its forecast for 2.9% global growth in 2023 when it releases its World Economic Outlook on Tuesday, citing the shocks caused by the COVID-19 pandemic, Russia's invasion of Ukraine and climate disasters on all continents.
On Monday, she noted that economic activity is slowing down in all three major economies - Europe, which has been hit hard by high natural gas prices, China, where housing volatility and COVID-19 disruptions are dragging down growth, and the United States, where interest rate hikes "are starting to bite."
Slowing growth in advanced economies, rising interest rates, climate risks and continuing high food and energy prices are hitting developing countries particularly hard, both leaders said, calling for concerted action to help emerging markets.
Georgieva, the first IMF chief from an emerging market economy, said advanced economies needed to "get the big, scary danger of debt crisis under control" because it would affect all countries, not just those with high debt burdens.
"Not the rosy picture. But if we joined forces, if we act together, we can reduce the pain that is ahead of us in 2023."
Georgieva said the IMF will be advocating this week for central banks to continue their efforts to contain inflation, despite the negative impact on growth.
If they don't do enough, she said, "we are in trouble. ... We cannot afford inflation to be a runaway train."
Fiscal measures should be "well targeted" to ensure they did not add more "fuel to the flames of inflation."
Malpass, who came under fire last month for declining to say whether he accepts the scientific consensus on global warming, said officials at the bank were working hard to free up more funds to address climate problems facing so many developing countries.
Georgieva said the world needed a staggering $3 to $6 trillion to address climate change and it was essential to increase collaboration with the private sector and leverage funds "on scale" to help meet the needs.
