Amid US-China Turmoil... IMF and WB Warn "Geopolitical Divisions Burden Economy" (Comprehensive)

Leaders of the two major international economic organizations, the International Monetary Fund (IMF) and the World Bank (WB), recently pointed out that geopolitical conflicts are placing a significant burden on the global economy and trade.

On the 10th (local time), Kristalina Georgieva, IMF Managing Director, stated at the IMF-World Bank Spring Meetings dialogue held in Washington DC that the divisions caused by geopolitical conflicts are among the biggest challenges the global economy must address.

She said, "The links that bind the world together have weakened over the past few years, and as divisions deepen, they negatively impact the integrated economy that has generated tremendous momentum for growth and prosperity over the past 30 years."

Referring to an IMF study that suggests global GDP could decline by up to 7% due to trade fragmentation, she emphasized, "Division of labor through trade must be effectively empowered to increase productivity."

[Image source=EPA Yonhap News]

At the IMF-World Bank Spring Meetings, held concurrently with the G20 Finance Ministers and Central Bank Governors meeting until the 16th, major global economic issues such as the Ukraine war, interest rate pressures, debt problems in the poorest countries, and sudden production cuts by oil-producing countries will be discussed.

Need for Liquidity Support for SMEs and Developing Countries

The heads of the two institutions agreed on the necessity of providing liquidity support to small and medium-sized enterprises (SMEs) and developing countries to ensure financial sector stability. IMF Managing Director Georgieva stressed that while central banks worldwide have no choice but to keep interest rates high to stabilize prices, financial sector stability is also important, and liquidity must be supplied to SMEs, developing countries, and emerging markets.

World Bank President David Malpass agreed with Georgieva’s assessment, expressing concern about the degree to which trade is fragmenting into regional or protectionist blocks. He said, "As the world halts and reverses globalization, productivity declines and risks burdening global growth."

He argued that although central banks are raising interest rates to curb demand, the long-term solution must be supply expansion, and short-term financing for SMEs should be increased. He particularly emphasized that developing countries, which have experienced capital outflows due to interest rate hikes, are facing severe difficulties from debt burdens, climate change, rising food prices, and slowing growth.

In this regard, Georgieva announced plans to hold a roundtable involving governments, private sector creditors, and creditor countries to address the sovereign debt issues of developing countries.

Global Economic Growth Rate Revised Upward to 2.0%

Meanwhile, at a press briefing on the same day, President Malpass raised the global economic growth forecast from 1.7% in January to 2.0%. He explained that the upward revision is due to China lifting its COVID-19 lockdowns and advanced economies performing better than expected.

However, he warned that recent developments such as stress in the banking sector and rising oil prices could weaken economic growth.

The IMF, which had forecast a 2.9% global economic growth rate in January, will release an updated outlook on the 11th.

This content was produced with the assistance of AI translation services.