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World Bank, IMF Spring Meetings Get Underway in Complex Economic Environment

People line up outside the IMF and World Bank spring meeting registration office in Washington, D.C., on April 10, 2023
People line up outside the IMF and World Bank spring meeting registration office in Washington, D.C., on April 10, 2023

The World Bank and International Monetary Fund's spring meetings kick off this week with an ambitious reform and fundraising agenda likely to be overshadowed by concerns over high inflation, rising geopolitical tension and financial stability.

"Despite the remarkable resilience of consumer spending in the United States, in Europe, despite the uplift from China's reopening, global growth would remain below 3%" in 2023, IMF managing director Kristalina Georgieva told a press conference on Monday.

The fund now expects global growth to remain at close to 3% for the next half decade — its lowest medium-term prediction since the 1990s.

Close to 90% of the world's advanced economies will experience slowing growth this year, while Asia's emerging markets are expected to see a substantial rise in economic output — with India and China predicted to account for half of all growth, Georgieva said last week.

Low-income countries are expected to suffer a double shock from higher borrowing costs and a decline in demand for their exports, which Georgieva said could fuel poverty and hunger.

Updated growth projections published in the IMF's World Economic Outlook on Tuesday will provide a broader look at how different countries are coping, with additional publications to detail fiscal and financial challenges to the global economy.

The World Bank, which forecast a gloomier economic picture than the IMF earlier this year, is slightly raising its prediction for global growth in 2023, from 1.7 in January to 2%, spurred by China's economic reopening, the bank's president David Malpass said at a press conference on Monday.

Tackling inflation remains a priority

This year's spring meeting will be held amid high inflation and ongoing concerns about the health of the banking sector following the dramatic collapse of Silicon Valley Bank.

Georgieva said last week that central banks should continue battling high inflation through interest-rate hikes, despite concerns that it could further inflame the banking sector.

"We don't envisage, at this point, central banks stepping back from fighting inflation," she told AFP in an interview.

"Central banks still have to prioritize fighting inflation and then supporting, through different instruments, financial stability," she said.

Ahead of the spring meetings, the IMF and World Bank also called on wealthier countries to help plug a $1.6 billion hole in a concessional lending facility for low-income countries that was heavily used during the COVID-19 pandemic.

Many low-income countries are now facing mounting debt burdens due in part to the higher interest-rate environment, which is also leading to capital outflows from many of the countries most in need of investment.

"For many of the developing countries it looks like they're in a phase of decapitalization rather than recapitalization," Malpass said on Monday. "That's gravely concerning."

US pushes for World Bank reforms

Malpass and Georgieva will use this year's spring meetings to try and make progress on stalled debt restructuring reforms.

"The goal is to share information earlier in the debt restructuring process and work toward comparable burden sharing," Malpass said.

There will also be a meeting on Wednesday to address war-torn Ukraine's recovery and reconstruction needs, with the World Bank estimating the country faces an "additional" $11 billion funding shortfall this year.

The spring meetings also provide an opportunity to make progress on an ambitious U.S.-backed agenda to reform the World Bank, so it is better prepared to tackle long-term issues like climate change.

U.S. Treasury Secretary Janet Yellen told AFP she expects member states will agree to update the World Bank's mission statement to include "building resilience against climate change, pandemics and conflict and fragility," to its core goals.

Yellen said she also expects an agreement to "significantly" stretch the World Bank's financial capacity, which "could result in an additional $50 billion in extra lending capacity over the next decade."

The changes will likely fall to the bank's next president to implement, with Malpass due to step down early from a tenure marked by concerns over his position on climate change.

He is widely expected to be replaced by U.S.-backed former Mastercard chief executive officer Ajay Banga, who was the only person nominated for the position.