Global economy faces biggest test since World War II amid 'confluence of calamities': IMF chief

IMF: Economy faces 'confluence of calamities,' including Ukraine war

The outlook for the global economy is rapidly darkening as it confronts crisis after crisis, according to International Monetary Fund Director Kristalina Georgieva. 

In a blog post ahead of the World Economic Forum in Davos, Switzerland, this week, Georgieva warned the global economy faces the "biggest test since the Second World War" as it confronts a "potential confluence of calamities," including the Russian war in Ukraine and the continued fallout from the COVID-19 pandemic. 


Both the pandemic and the invasion have helped to fuel sky-high inflation across the world while simultaneously dragging down economic growth. Surging food and energy prices are hurting people around the world, while central banks are moving quickly to tighten monetary policy in hopes of taming inflation – further straining indebted nations, companies and families. 

IMF managing director Kristalina Georgieva

IMF Managing Director Kristalina Georgieva speaks during a joint press conference on COVID-19, March 4, 2020, in Washington, D.C.  (Samuel Corum/Getty Images / Getty Images)

She warned that geopolitical disintegration among nations could also have enormous global costs, hurting people across the socioeconomic spectrum. Technological fragmentation alone could shave 5% off of many nations' economies.

"Our ability to respond is hampered by another consequence of the war in Ukraine – the sharply increased risk of geoeconomic fragmentation," Georgieva said. "Tensions over trade, technology standards and security have been growing for many years, undermining growth – and trust in the current global economic system.

The Washington-based institution already slashed its economic outlook this year, projecting that global domestic gross product will grow by 3.6% in 2022 – a 0.8 percentage point drop from its January estimate. On top of that, the IMF expects global inflation to remain elevated as a result of the Ukraine war. 

"Global economic prospects have been severely set back, largely because of Russia’s invasion of Ukraine," Pierre-Olivier Gourinchas, the IMF chief economist, wrote in a blog post last month. "This crisis unfolds even as the global economy has not yet fully recovered from the pandemic." 

Inflation food prices

A man shops at a Safeway grocery store in Annapolis, Maryland, on May 16, 2022. (Jim Watson/AFP via Getty Images / Getty Images)

Inflation has accelerated as the economy recovers from the very severe but brief pandemic-induced recession; Americans are already facing the hottest inflation in a generation. The Labor Department reported earlier this month that consumer prices soared 8.3% in April from the previous year, near a 40-year high. 

As a result, the Federal Reserve is moving aggressively to tighten monetary policy: The U.S. central bank raised interest rates by a half-basis point in May and has signaled that similarly sized hikes are on the table at future meetings. Chairman Jerome Powell recently pledged that officials will "keep pushing" until inflation falls closer to the Fed's 2% target. 

Still, he has acknowledged there could be some "pain associated" with reducing inflation and curbing demand but pushed back against the notion of an impending recession, identifying the labor market and strong consumer spending as bright spots in the economy. Still, he has warned that a soft landing is not assured. 


"It's going to be a challenging task, and it's been made more challenging in the last couple of months because of global events," Powell said Wednesday during a Wall Street Journal live event, referring to the Ukraine war and COVID lockdowns in China.

But he added that "there are a number of plausible paths to having a soft or soft-ish landing. Our job isn't to handicap the odds, it's to try to achieve that."