Weaknesses of growth – Kommersant newspaper No. 11 (7456) of 01/21/2023

Global economic growth of 2.7% expected this year will be one of the lowest in the past two decades – it was lower only twice: during the global financial crisis and in the “pandemic” 2020, the head of the International Monetary Fund (IMF) Kristalina Georgieva. The fund names three main factors that will slow down the growth of the global economy in 2023: high inflation, increased interest rates and the consequences of the Russian military operation in Ukraine.

The agenda of the World Economic Forum (WEF) in Davos this year was dictated by fears associated with deglobalization, or, as they now say, “fragmentation” of the world economy. Among the causes of the process named by experts are Brexit, the trade war between the United States and China, the consequences of the pandemic and the conflict in Ukraine (see “Kommersant” for January 17).

On Friday, at a session on the outlook for the global economy (it traditionally ends the business program of the forum), the head of the IMF, Kristalina Georgieva, noted that fragmentation could lead to a loss of at least 0.2% of global GDP (previously, the fund estimated its size in 2022 at $101.56 trillion. — “b”). And this minimum is possible only if countries are able to adapt to the new situation and establish uninterrupted supply chains. If this does not happen, then the fall could be 7% of GDP, that is, approximately $7 trillion.

The head of the IMF recalled that the fund’s current forecast for global GDP growth in 2023 is 2.7%. “This is the third lowest growth rate in recent decades, not counting the global financial crisis and the COVID-19 pandemic,” Kristalina Georgieva explained.

Earlier, the head of the IMF identified three main factors slowing down global growth: the conflict in Ukraine, rising inflation and high interest rates.

Speaking about China, Kristalina Georgieva noted that now the fund is waiting for the GDP growth in this country to accelerate to 4.4%. Recall that at the end of 2022, the Chinese economy grew by only 3% against the previously expected 5.5% (for more details, see “Kommersant” dated January 18). One of the tasks of Chinese Vice Premier Liu He, who arrived in Davos, was precisely to provide assurances to partners that in the coming year the country would restart the country’s economy, which had sagged due to the “zero tolerance” policy. However, on Friday, the head of the IMF also saw risks in a possible acceleration of Chinese growth: China’s “opening” could cause an increase in global demand and energy prices, which, in turn, would lead to an increase in global inflation.

The main thesis of the head of the European Central Bank (ECB), Christine Lagarde, who spoke at the same final session of the forum, was the words that, although the rise in prices has already passed its peak value, the fight against inflation should not be weakened.

The head of the ECB urged countries to stick to the “resilience course” that was set last year and not to allocate excessively large subsidies to protect households and businesses from the consequences of the energy crisis caused by the Russian military operation.

Note that on the sidelines of the forum, Christine Lagarde and other representatives of the ECB rejected proposals to slow down the pace of interest rate increases after the February meeting of the regulator (it is expected to increase rates by 50 basis points).

The head of the French Ministry of Finance, Bruno Le Mer, on the last day of the forum, warned countries against pursuing a policy of protectionism against their producers. Together with German Chancellor Olaf Scholz, he criticized the law signed by US President Joe Biden to reduce inflation, which involves the introduction of large-scale incentives for national companies. It is reported that in the near future Bruno Le Mer will come to Washington to discuss the consequences of the American law on reducing inflation for European countries and the possibility of revising some of its provisions.

Christina Borovikova