IMF chief Kristalina Georgieva said Friday that the new Omicron variety of Covid-19, like the Delta strain, might impede global economic recovery.
“A new variant that may spread very rapidly can dent confidence and in that sense, we are likely to see some downgrades of our October projections for global growth,” she said at a Reuters event.
The fund forecast global growth of 5.9% this year and 4.9 percent in 2022 in its most recent World Economic Outlook, but the US and other major economies saw substantial negative adjustments after the introduction of the Delta variant “created some friction,” according to Georgieva.
“Even before the arrival of this new variant, we were concerned that the recovery, while it continues, is losing somewhat momentum,” the IMF chief said, noting that policymakers are now dealing with new issues like inflation.
The International Monetary Fund’s most recent forecasts voiced concerns that global supply chain challenges and uneven vaccination distribution were stalling the recovery and leaving certain countries behind.
A wave of price hikes has been spurred by a boom in demand in many industrialized economies, as well as shortages of critical components like semiconductors.
Georgieva voiced optimism less than two months ago that inflation would not become a “runaway train,” but on Friday she stated the US Federal Reserve will have to raise interest rates in 2022, not 2023, as the IMF had forecast.
The Fed, which reduced the benchmark lending rate to zero in the early days of the pandemic, has already begun to reduce its stimulus measures and has indicated that it will accelerate this process, putting it in a position to raise rates off zero by mid-year.
“We do believe that the path to policy rate increases may be walked faster,” Georgieva said.
