"Just to give you a sense of how significant the hit on Europe is, our pre-pandemic projections and our current projections differ by half a trillion euros", says the IMF's managing director Kristalina Georgieva.
In recent years the global economy has been under considerable pressure. Following two years of the Covid-19 pandemic, the emergence of the Omicron strain prevented swift economic recovery.
The world and in particular European economic recovery suffered the severe impact of Russia's war in Ukraine, which has deepened the strain across the Eurozone and makes for a particularly difficult winter ahead.
Timely then that in conversation with Euronews' Business Editor, Sasha Vakulina, is the IMF Managing Director Kristalina Georgieva. Kristalina Georgieva was previously CEO of the World Bank, during which time she served as Interim President of the World Bank Group for three months.
She helped shape the agenda of the European Union in her role as European Commission Vice President for Budget and Human Resources and as Commissioner for International Cooperation, Humanitarian Aid and Crisis Response. She holds a PhD in Economic Science from the University of National and World Economy in Bulgaria.
Read the full interview here
Joining me on the Global Conversation on Euronews is Kristalina Georgieva, the Managing Director of the International Monetary Fund. Thank you so much for being here.
Georgieva: Thank you for inviting me.
Please Ms.Georgieva, shortly after the annual meetings. Where do we stand now as far as the global economy is concerned?
Georgieva: Well, the horizon has darkened significantly over the last year. One year ago, we were recovering from COVID, and we finished with over 6% global growth. And then two shocks. Omicron and Russia's war in Ukraine has not only interrupted the recovery but reversed it. The heat on European economies is such that we actually expect half of the countries in the eurozone to experience at least two-quarters of negative growth. In other words, a recession. Just to give you a sense of how significant the hit on Europe is, our pre-pandemic projections and our current projections differ by half a trillion euros.
In other words, the loss to the European people is quite, quite dramatic when we look at the rest of the world. China slowing down mostly because of the zero-covid policy. The United States doesn't have the same terms of trade shock that Europe is experiencing and therefore in somewhat better condition. So, in comparison, Europe is in a more difficult position, but Europe is not alone, faced with a very difficult 2023.
When the so-called inflation issue started, there was lots of conversation that this is temporary and here we are here and it's not that temporary. How temporary is this negative growth?
Georgieva: Why did we say it was transitory? Because none of us could predict Russia's war. Once it hit, conditions dramatically changed and pressured through energy. And food prices on inflation are still quite dramatic, quite significant. When we look forward, I am not going to sugarcoat it, 2023 could be tougher than 2022. Next winter for Europe, maybe even harsher than this winter. Why? Because European policymakers acted very swiftly to fill gas storage. If conditions remain as they are with Russia not providing gas to Europe, how is this gas storage going to be filled next year?
The key question today in Europe is can Europe stay united and can the public be brought on board for this difficult time? And if I have one call to everybody is, to help with energy-saving measures. We can all do our part this winter. So, we can come to spring without dramatic damage, which is rationing without getting to that point.
But I am more optimistic about the future of Europe because what this crisis has done is to accelerate the green transition, which would generate growth and opportunities the same way Covid's accelerated the digital transition. This crisis is going to accelerate the green transition.
Well, you said we must support Ukraine's ongoing shift from an emergency phase of economic management to a recovery phase. But what are some of the key steps that you have been seeing in measures implemented by Kyiv, also together with the IMF, that helped to keep up going? Now, because we are talking about the economy that is in an ongoing war and still operating.
Georgieva: First, my admiration for the government of Ukraine and the people of Ukraine. The unity that they demonstrate is one that we in the European Union cherish. And this is why Ukraine is now on a path to joining the European Union. The quality of governing is very impressive. They have such clarity of purpose and discipline that I can only admire and praise them. What do we do together with Ukrainian authorities immediately after the start of the war? We concentrated on what measures can be taken to protect the economy from collapse. And while it is contracting by probably 30 to 35%, it is very far from collapsing. On the contrary, a part of the European economy, of the Ukrainian economy is growing again.
You mentioned here that Ukraine is on the way to the European Union with this step-by-step integration also of Ukraine's economy and some of the sectors. Do you see this integration process also accelerating now more than it could have been?
Georgieva: Oh, of course. Of course. A terrible war, a tragedy for Ukraine. But it has made the Ukrainian nation stronger and the country much more determined to take the steps that are necessary for its own people and for entering the European Union. The attention that is being paid to reaching out to people in Ukraine and keeping the morale of the population up, delivering pensions, and social services. A small anecdote. My, I have family in Kharkiv. In May, traditionally, flowers and trees are planted. And that was done during the war with bombing still going on in the area. So bringing of the unity of the nation is also in the direction of entering the European Union. If I have one message to Ukraine, is in Bulgaria we have a saying. Rush slowly. Do what needs to be done. But be prudent, be careful. So it is done well, so it doesn't have to be redone in the future.
Ms. Georgieva, finally, Russia's invasion shows no signs of abating at this stage. While we have discussed what's next for Ukraine's economy, what is next for Russia's economy?
Georgieva: The Russian economy contracted this year. It will contract next year. The implications for Russia are going to be more severe over the medium and long term. The outflow of Russians, especially highly qualified Russians because of the war, is hurting Russia. It is losing its role in the global economy. We see how the accelerated transition to alternatives to oil and gas is going to shrink the market for Russia. And over time, the one industry that they are strongly relying on is going to diminish its role.