For the head of the IMF, employment has not yet suffered the effects of monetary tightening

The effect of financial tightening on employment “is still to come”, but the central banks “have not finished their work” against inflation, estimated this Thursday the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, during a meeting with the press.

Although the economic slowdown is expected to be greater in 2023 than the Fund predicted in its latest publications last October, domestic labor markets are “showing resilience” so far, Kristalina Georgieva stressed, “which is a point to favor”. “While people have jobs, even if prices are high, they consume, which helped the economy in the third quarter, particularly in the United States and Europe, but we know that the impact of the adjustment is yet to come” in terms of unemployment, insisted the head of the IMF.

Especially since the situation is not going to improve, due to “inflation that continues to be tenacious” and in the face of which “the work of the central banks has not yet finished”, recalled Kristalina Georgieva, implying at the same time that “the crisis is probably not over.

social tensions

With the risk of social tension if the effect on employment turns out to be especially significant, warned the managing director of the IMF. “We are just at January 12 and we already have Brazil, Peru, Bolivia, Colombia, the United Kingdom, all for different reasons but with very clear social tensions.”

Kristalina Georgieva thus stressed the need to prevent financial tightening, which should end up translating into an increase in unemployment, from adding additional tension to social relations. At the same time, the impact of the interest rate hike on the indebted countries will also be dramatic, recalled Kristalina Georgieva, whose institution has been warning for several months of the risk of some sixty emerging and developing countries slipping into a sovereign debt crisis.

However, the IMF continues to believe that “a global recession can be avoided” even if a certain number of countries saw their GDP fall, at least “if there is no additional shock,” the general manager recalled. Especially if China does not question its change in policy in the face of the pandemic, when an economic recovery for the country from mid-year “could be the most significant global growth target for 2023,” added Kristalina Georgieva. .