IMF's Georgieva Says Recovery Will be 'Some Way Off' Even if War Ends Tomorrow

At a press briefing in Washington, IMF Managing Director Kristalina Georgieva said that countries will need to brace for 'tough times' if oil prices continue to remain high. She spoke with Bloomberg’s Francine Lacqua on the sidelines of the meeting about the IMF's call to downgrade its global growth forecast, and why markets need to be more cautious in this era of ongoing uncertainty. - Central banks should resist the urge to hike interest rates in response to the Middle East crisis as this could damage economic output, according to International Monetary Fund Managing Director Kristalina Georgieva.

Given that long-term inflation expectations are well anchored and haven’t budged, “it is important that the central banks act carefully,” she told Bloomberg Television. “Those that are in a good position of credibility, they can take a wait-and-see attitude. They also have to signal ‘we are prepared to act if necessary.’” “But please don’t rush: my worry is that because of 2022, now central banks may say ‘let’s move faster’ and that could be dangerous because it would suffocate growth,” she said in the interview on Wednesday on the sidelines of the IMF and World Bank’s spring meetings in Washington.

Earlier this week, the IMF — the world’s lender of last resort — downgraded its growth projection for the year to 3.1% after the war in the Middle East triggered a major oil shock. Officials are already shifting toward their “adverse” scenario, with growth seen at 2.5% this year and an average petroleum spot price index of around $100 per barrel.  Donald Trump’s war on Iran has already produced an initial bout of inflation, with further energy-related pressure in the pipeline, putting global policymakers on alert for possible rate hikes. Still, major central banks have primarily indicated caution so far.

In a press conference earlier, Georgieva said that the IMF expects requests from at least a dozen of countries on new financing programs, a number of them in Sub Saharan Africa. The Washington-based lender currently has 39 active programs with countries.

“We would move very swiftly to respond to requests from countries,” she said. “My message to the membership is ‘if you need help financially, don’t hesitate, move fast’.”

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