Senior Vice President, Global Initiatives, U.S. Chamber of Commerce
October 17, 2022
The International Monetary Fund and World Bank held their annual meetings in Washington, D.C., this week, convening ministers of finance, central bankers, leading economists, and civil society.
Why does it matter?
At a complex and daunting time for the global economy, good policy and coordinated action can make a difference.
If things were gloomy in the spring, they are downright dismal now, and looking even more pessimistic for 2023.
- 3.2%: forecasted global growth in 2022, down from 6% in 2021
- 2.7%: global growth forecast for next year
- 8.8%: forecast for global inflation in 2022, up from 4.7% last year (bright spot: inflation is expected to decline to 6.5% in 2023 and 4.1% in 2024)
- 1%: trade growth forecast for 2023, according to the World Trade Organization
How did we get here?
The shocks and crises have just kept coming over the past few years (the COVID-19 pandemic, Russia’s invasion of Ukraine, and droughts and natural disasters), with the ramifications building on an already large list of global challenges like climate change and unsustainable debt.
3 big concerns
- Cost-of-living crisis: Multi-decade inflation highs, rising food and energy insecurity, and record high debt are impacting people everywhere, with the most vulnerable hit the hardest.
- The three largest economies are slowing. The U.S., Europe, and China are all major markets that affect the economies of the rest of the world. They’re all slowing, but in China, rising unemployment, persistent lockdowns, and a slowdown in the property sector have contributed to the IMF’s GDP forecast dropping to 3.2% for this year and 4.4% for 2023. This slowdown will have wide-ranging impacts, especially for countries with economies centered around manufacturing and dependent on exports to China.
- Rising interest rates: Central banks have no choice but to raise interest rates to tackle inflation, but it’s a bitter pill to see borrowing costs rise for the private sector.
What can be done?
The IMF offered these recommendations for governments around the globe:
- Central banks must tackle inflation.
- Governments may need to provide targeted cash support to the most vulnerable. This can be a catch-22 though because more fiscal support will put upward pressure on inflation.
- Creditor nations — including China, India and Saudi Arabia, as well as the G7 — will need to provide additional and coordinated debt relief for less-developed countries.
The U.S. Chamber has offered these recommendations for U.S. policy:
- Unleash American energy production. Energy prices are driving inflation. The U.S. has vast oil and natural gas resources that should be developed expeditiously. Doing so would help meet our own needs and reduce reliance on OPEC and other foreign sources, and it would also provide reliable energy supplies to our Allies seeking to wean themselves off Russian oil.
- Lower tariffs. Reducing taxes on American families and companies helps them save money on everything from manufacturing inputs to everyday goods.
- Fix the worker shortage. We have four million more job openings than unemployed workers, and we’re missing 2.9 million people from the labor force. We must help Americans acquire skills to fill open jobs and increase legal immigration to help employers fill job openings.
Role of private sector
Throughout the week, the U.S. Chamber brought together corporate executives with ministers of finance and central bank officials from more than a dozen countries to discuss how the private sector can work with governments to drive growth, even during – or maybe despite – times of overlapping economic and geopolitical challenges.
The Fund and World Bank will only be able to carry out their missions if they deepen their engagement with the business communities of both donor and recipient nations.
About the authors
Gary Litman, senior vice president of Global Initiatives at the U.S. Chamber of Commerce, is responsible for the Chamber’s policy advocacy for the economic reform agenda of the G20, G7, and international institutions. He leads the Chamber’s participation in a range of global business coalitions and related business summits focused on sustainable economic policies.