(Bloomberg) — International Monetary Fund director Kristalina Georgieva said she expects slowing growth from higher borrowing costs to feel like a recession for millions of people next year, even if the global economy avoids a technical downturn.
“Increased interest rates will bite and we will see the impact on growth,” Georgieva said in a New York interview with Bloomberg Television’s Francine Lacqua on Wednesday.
“It will feel like a recession for hundreds of millions of people, so brace yourself,” she said. “Hopefully, once we get inflation under control, we can see a foundation for growth and recovery.”
Rising prices have forced central banks worldwide to tighten monetary policy, which is expected to curb inflation but threaten to plunge economies into recession. In the US, Federal Reserve officials turned to aggressively raising rates to contain the fastest price hikes in four decades.
US interest rate hikes have also contributed to the strengthening of the dollar, making it more difficult for countries to service dollar-denominated debt and exacerbating their own inflation pain.
Georgieva also said in the interview that there was “no doubt” that the IMF’s board of directors would soon approve a so-called food shock, a mechanism to help countries affected by the supply crisis caused by Russia’s invasion of Ukraine. which has disrupted grain transports.
The war-torn country could be one of the countries that could benefit from the effort, Georgieva said Sept. 13 after speaking with President Volodymyr Zelenskiy. Ukraine could receive aid comparable to the $1.4 billion in emergency aid received in March, just days after the war started, Georgieva said earlier. The country faces a budget deficit of as much as $5 billion a month, according to government estimates. Kiev is also scheduled to repay about $4 billion in debt to the IMF by 2024.
The IMF will launch a mission to Ukraine in October, Prime Minister Denys Shmyhal said on Tuesday. Last week, he criticized the Washington-based lender for being too slow to strike a new deal as Ukraine fights back against a large-scale invasion by President Vladimir Putin’s forces that began in February.
Kiev officially applied for a new IMF loan program in August, hoping to get a first disbursement as early as November.
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