The World Bank’s chief economist said Wednesday that keeping interest rates “higher for longer” could lead the poorest countries to bankruptcy, similar to what happened in the 1970s.
“Despite all the shocks, we haven’t seen any major economy really get into trouble, but the good news basically ends there, because the problem now is that, due to high interest rates, growth is slowing down a lot,” Indermit said. Gill at the press conference marking the official opening of the annual meetings of the International Monetary Fund (IMF) and the World Bank, taking place this week in Marrakech, Morocco.
“In the 1970s, when the Federal Reserve raised interest rates for a long time, one of the lessons we learned is that the tightening cycle didn’t just last a couple of years, but it left about 24 economies bankrupt, and I think we can predict that some countries are going to have problems now,” said the World Bank’s chief economist.
The prospect of higher interest rates for longer was one of the World Bank’s central concerns during the press conference, showing the importance of the impact that high interest rates have on less developed countries, which depend on loans and financing external, usually in dollars, to finance economic and social development.
“The continuation of higher interest rates for a longer period of time [‘higher for longer’, na expressão em inglês] “It can be a challenging event in many ways, from investments to people who, over the years, have become accustomed to a low interest rate environment,” said World Bank President Ajay Banga.
The concern of the World Bank, expressed in the conversation with journalists in Marrakech, closely follows the assessment made by the IMF, which in the reports presented this week at its annual meetings foresees lower inflation for 2024 than the current one, but still high, and a further slowdown of the economy. that actually.
The IMF expects global growth to slow from 3.5% in 2022 to 3% in 2023 and 2.9% in 2024, below the historical average (2000-2019) of 3.8%, with a forecast for 2024 which falls 0.1 percentage points (pp.) in comparison. to the July report.
In its inflation forecasts, the Washington-based organization expects global inflation to decrease from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024, an upward revision of 0.1 points percentages (pp) and 0.6 (pp) respectively, without expecting to return to the objective of most central banks by 2025 in most economies.
Source: TSF
