IMF chief sounds alert on jobs even though global economy ‘less bad than feared’

International Monetary Fund (IMF) managing director Kristalina Georgieva said on Friday that the global economy “is less bad than we feared a couple of months ago”, as inflation has started to ease and China has reopened after almost three years of strict Covid-19 restrictions.

However, she warned on the final panel session of the World Economic Forum (WEF) in Davos on Friday about the potential inflationary impact of China’s economic reopening, as demand for oil and gas grows.

In addition, Ms Georgieva said that while labour markets have held up so far, even as companies grapple with higher input costs, the effect of major central banks hiking interest rates in the past year yet to be fully felt.

“If they bite more severely, then we can see unemployment going up – and it is a very different for a consumer to have a cost-of-living crisis in a job than a cost-of-living crisis and job,” she said. “So, we have to be thinking of unemployment possibly going up at a time when fiscal space in governments is very tight.”

Having downgraded its global growth expectations three times in the past year, the International Monetary Fund (IMF) is expected to raise its forecasts in its next statement, scheduled to be published at the end of this month.

The fund’s first deputy managing director, Gita Gopinath, signalled as much earlier this week when she predicted earlier this week at the WEF that there would be an “improvement” in growth the second half of the year and into 2024. Positive data from Europe and the US in recent weeks have boosted hopes that the world’s economy will avoid a recession this year.

Davos: Politics, business and climate change converge at the WEF

Climate change is one of the themes of this year’s World Economic Forum in Switzerland. Markets Correspondent, Joe Brennan, reports from Davos where a recent winter heatwave means the highest town in Europe has significantly less snowfall than usual. The Taoiseach, Finance Minister and a delegation from the IDA are there as part of Ireland’s attempt to court FDI. All three parties are awaiting news from Microsoft on how many Irish jobs will be among the plans announced today to cut its workforce by 10,000, globally.

The IMF currently sees global growth slowing to 2.7 per cent this year from 3.2 per cent in 2022.

Ms Georgieva declined to comment on whether the IMF will raise its forecasts in its next global outlook report on January 31st, other than to say that any movement in its projection “is not going to be dramatic”.