In the context of the first World Economic Forum (WEF) held directly since 2020 opening in Davos, Switzerland on May 23, the International Monetary Fund (IMF) said that the world economy is facing the biggest challenge since World War II.
IMF managing director Kristalina Georgieva said the world is facing a series of potential disasters. She warned that the Russia-Ukraine conflict has added to the impact of the COVID-19 pandemic, weighing on economic recovery and increasing inflation as food and fuel costs skyrocket.
Rising interest rates are putting more pressure on countries, companies and households with piling up debts. Market chaos and continuous bottlenecks in the supply chain also pose risks.
In addition, there is climate change. International Energy Agency (IEA) Director Fatih Birol called on countries to make the right investment choices to deal with the shortage of fossil fuels caused by the Russia-Ukraine conflict.
The level of challenge for the world economy has been highlighted in a new report by the Organization for Economic Cooperation and Development (OECD) on May 23, showing that the GDP of the G7 countries decreased by 0.1% in the first quarter of 2022 compared to three months before.
German Economy Minister Robert Habeck said: We cannot solve problems if we only focus on one problem.
If none of these problems are addressed, I am afraid we will see a global recession with huge consequences, not only for climate change, climate protection but also for global stability.
To limit economic tensions, the IMF is calling on government officials and business leaders to meet in Davos to discuss lowering trade barriers.
But as countries are addressing the domestic cost of living crisis, some are going in the opposite direction, implementing measures to limit food and agricultural exports, which could aggravate shortages and push up prices globally.
Earlier this month, India's decision to ban wheat exports caused grain prices to skyrocket, despite being a relatively small exporting country. Indonesia banned most palm oil exports in April to protect domestic supply, but will lift the ban this week.
Speaking during a visit to Japan on May 23, President Joe Biden said that recession is not inevitable. He reiterated that the White House is considering removing some tariffs on Chinese goods from Donald Trump's time, which Finance Minister quan Yellen said is more harmful than beneficial to US consumers and businesses.
Jason furman, a former top economic adviser to President Barack Obama, said: The best solution for the administration is to lift tariffs on Chinese goods. That option is not big, but it will be big beyond any other option they have.
furman told CNN that the US is in the worst situation of any economy in the world. Consumers are worried about inflation, but they still have large savings and strong spending.
furman said he was more concerned about the risk of a recession for about a year or so in the future. He said the US Federal Reserve should try to suffer a soft landing, but it was unclear whether it would succeed.
Meanwhile, China's economic growth may decline this quarter due to the impact of COVID-19 blockades in Shanghai, Beijing and dozens of other cities, along with the consequences of the real estate crisis. The Chinese central bank cut key interest rates at a record level on May 20 after home sales collapsed.
Zhu Ning, a professor at the Shanghai Advanced Financial Academy, said he believes that authorities still have many options to address a series of challenges faced by the world's second largest economy. According to Mr. China, there is still a lot of room if he wants to, such as lowering interest rates, to stimulate the currency for the economy.
