IMF says 'high uncertainties' put global economy at risk as Russia blocks communique

The fund pointed to the Russia-Ukraine war as the biggest factor hampering growth

Nadia Calviño, chairwoman of the IMF's international monetary and financial committee, leaves after a briefing during the annual meetings of the IMF and World Bank in Washington. AFP

The International Monetary Fund (IMF) has said that the global economy is slowing down amid “high uncertainties”, urging greater international co-operation and demanding an end to Russia's military offensive in Ukraine.

Nadia Calviño, chairwoman of the Washington-based fund's monetary and financial committee, pointed to multiple shocks, which include the war, soaring inflation and the rising costs of living, that are making it difficult to gauge the global economy's future and cautioned that a downgrade to the outlook is likely.

“More than two years of pandemic, followed by Russia’s war against Ukraine, are weighing heavily on economic activity with significant impact on livelihoods,” said Ms Calviño, who is Spain's Economy Minister.

“Inflation is at multi-decade highs, debt is elevated, food and energy security risks are increasing, supply-chain and trade disruptions persist, and financial conditions are tightening, while capital flow and exchange rate volatility have increased.”

The call, however, was not unanimous: Russia once again blocked a consensus on issuing a joint communique, forcing the IMF to issue a chair's statement instead. Anton Siluanov, Russia's Finance Minister, joined the meeting online.

Separately, IMF managing director Kristalina Georgieva, in a press conference at the annual meetings of the IMF and World Bank in Washington, called for an end to the Russian-Ukraine conflict.

“It is very clear for just on a human level, practical level, objective level — stop the war. Stop the war. This is the most straightforward way to get the world economy in better shape. Stop the war,” she said.

The global economy is being battered by a multitude of geopolitical and economic factors. Inflation in particular has been damaging, soaring to its highest levels in four decades and prompting central banks to raise interest rates to temper it, which raises fears of a recession.

Earlier this week at the meetings, Ms Georgieva had said that the world risks a recession in 2023.

Meanwhile, Russia's offensive in Ukraine, which has entered into its eighth month, has plunged the latter into a deep economic and political crisis.

The conflict is affecting economies around the world, with emerging markets and developing countries in Europe and Central Asia expected to bear the brunt, the IMF had earlier warned.

US Federal Reserve chairwoman Janet Yellen, in a separate conference in Washington, reiterated Ms Georgieva's call.

“It's obvious what the most important is, and everyone agrees Russia should stop its war on Ukraine,” she said.

Last week, the IMF approved the release of $1.3 billion in emergency funding for Ukraine, to help the country meet its “urgent” economic requirements. The fund also signalled that it will continue its support to ensure fiscal stability.

The IMF in the chairwoman's statement called for “appropriate domestic policies and intensified multilateral co-operation” to protect the stability of the global financial system in order to limit “negative spillovers”.

“Our priorities are to fight inflation and to protect the most vulnerable populations while safeguarding debt sustainability, growth, and macro-financial stability, and managing other vulnerabilities,” Ms Calviño wrote.

She said that while central banks are “strongly committed” to achieving price stability and ensuring that inflation remains in check, there needs to be “clear communication” to help avoid exacerbating market volatility

“Fiscal policy will prioritise the protection of vulnerable groups from the burden of rising cost of living through temporary and targeted support while ensuring fiscal sustainability,” she added.

The IMF's monetary and financial committee is expected to hold its next meeting on April 21, 2023.