Geneva, Jan 22 (IANS): On the last day of the World Economic Forum's (WEF) "Davos Agenda 2022" virtual event, the leaders of the International Monetary Fund (IMF) and the European Central Bank (ECB) discussed the future of the global economy and called for urgent policy actions to ensure an equitable recovery.
During the WEF's week-long dialogue that began on January 17, several heads of state and government, cabinet ministers, ambassadors, heads or senior officials of international organisations, chief executive officers and other leaders reflected on the forum's theme-setting Agenda on the "State of the World" and discussed the critical challenges facing the world today.
In the "Global Economic Outlook" session on Friday, the IMF's Managing Director Kristalina Georgieva emphasised that "The response to the pandemic crisis has been anything but orthodox. In a highly coordinated fashion, the world's central banks and financial authorities have prevented the world from falling into yet another great depression."
"We have to be data-driven and we have to be flexible. If I were to offer policymakers a new year's resolution, it would be policy
flexibility," she stressed.
Georgieva said, "On the positive side, we anticipate the recovery to continue. But it is losing some momentum and it is faced with the renewal of infections, on top of that the much more persistent than anticipated inflation, and on top of it all the record-high global debt levels at $226 trillion."
In its December 2021 update of the Global Debt Database, the Washington D.C.-based IMF said that global debt rose by 28 percentage points to 256 per cent of gross domestic product (GDP) in 2020, Xinhua news agency reported.
In its World Economic Outlook issued in October last year, the IMF projected the global economy to grow 5.9 per cent in 2021 and 4.9 per cent in 2022. For China, it forecast a GDP growth rate of eight per cent in 2021 and 5.6 per cent in 2022. The IMF is set to release an update of the World Economic Outlook on January 25.
IMF's Managing Director also warned of a growing divide and divergence between countries: "Conditions in countries are very different. We cannot anymore have the same policy everywhere, it has to be country-specific. That makes our job in 2022 so much more complicated."
"My main message here is to recognise that the world must spend the billions necessary to contain Covid-19 in order to gain trillions in output as a result," she stressed.
On inflation, Christine Lagarde, President of the European Central Bank, said she did not expect to see a similar rise as in the US, although the consumer price index in the eurozone hit a new record high of five per cent in December last year, mainly triggered by the soaring energy prices in Europe.
"In Europe, we are not seeing inflation spiral out of control. We assume energy prices will stabilise from the middle of 2022, bottlenecks will also stabilise in 2022 and gradually inflation numbers will decline."
The consumer price index in the US rose seven per cent in December 2021 as compared to December 2020, which was the largest 12-month increase since 1982, according to the US Labor Department.
"When I look at the labor market, we are not experiencing anything like The Great Resignation, and our employment participation numbers are getting very close to the pre-pandemic level," she added.
Lagarde also said that core inflation, a measure that excludes transitory or temporary price volatility, is at 5.5 per cent in the US and at 2.6 per cent in the eurozone.
However, she stressed that "In Europe, we are unlikely to face the kind of inflation increases that the US market has faced."
"More recently, we have learned the lesson of humility, the ECB, IMF, OECD and others all underestimated the recovery, the employment participation and obviously, inflation," she added.