by Martina Fuchs
GENEVA, Jan. 21 (Xinhua) -- 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 Jan. 17, several heads of state and government, cabinet ministers, ambassadors, heads or senior officials of international organizations, 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 emphasized 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 continued: "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 U.S. dollars."
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 percent of gross domestic product (GDP) in 2020.
In its World Economic Outlook issued in October last year, the IMF projected the global economy to grow 5.9 percent in 2021 and 4.9 percent in 2022. For China, it forecast a GDP growth rate of eight percent in 2021 and 5.6 percent in 2022. The IMF is set to release an update of the World Economic Outlook on Jan. 25.
Georgieva 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 recognize that the world must spend the billions necessary to contain COVID 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 United States, although the consumer price index in the eurozone hit a new record high of five percent 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 stabilize from the middle of 2022, bottlenecks will also stabilize in 2022 and gradually inflation numbers will decline."
The consumer price index in the U.S. rose seven percent in December from a year earlier, which was the largest 12-month increase since 1982, according to the U.S. 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 said.
Lagarde also said that core inflation, a measure that excludes transitory or temporary price volatility, is at 5.5 percent in the U.S. and at 2.6 percent in the eurozone.
However, she stressed that "In Europe, we are unlikely to face the kind of inflation increases that the U.S. 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 said. ■
