Washington DC October 11 2022: Italy faces a looming economic contraction as the gas-dependent country struggles with the energy crisis, said Petya Koeva Brooks, deputy director of the International Monetary Fund’s research department,
“We are expecting Italy to enter a technical recession in the coming quarters and a big impact has come from the energy crisis and the elevated inflation and the adverse impact on real incomes,” Koeva Brooks told a news conference Tuesday, adding that risks to the outlook are “very much on the downside.”
The IMF is holding its annual meetings this week, with the gathering kicking into gear on Tuesday as global finance and central bank chiefs converge on Washington, along with their development and banking counterparts, to chart a path forward for the global economy.
Even after the misery of this year -- surging inflation, war in Ukraine, China’s slowdown -- Bloomberg Economics is asking whether next year could be worse. The unfortunate answer is yes, particularly as the Federal Reserve’s rate hikes drive the dollar higher, stressing economies around the world.
The IMF also warned of a deteriorating outlook, cutting its forecast for worldwide growth next year and saying that policies to tame high inflation may add risks to the global economy.
European Central Bank supervisory board chief Andrea Enria said he expects some cross-border consolidation among the region’s banks to eventually happen, although he doesn’t sense much “appetite” among lenders for now.
The ECB has made clear to lenders that it isn’t hostile to the idea of consolidation, he said, speaking at the Institute of International Finance’s 2022 annual membership meeting in Washington.
“Some banks” now face higher capital requirements after they didn’t show sufficient “responsiveness” to the ECB’s guidance on leveraged finance, Enria also said. He said the banking sector remained resilient but he was concerned about the worsening macroeconomic outlook.
US Treasury Secretary Janet Yellen urged the world’s largest economies to offer more help to low-income countries hit hardest by the disruption of global food supplies.
“We must step up financial assistance to address the impact on the most vulnerable, including through multilateral mechanisms like the Global Agriculture and Food Security Program,” she said at a gathering of finance and agriculture ministers from Group of 20 countries.
The IMF reduced its prediction for global growth next year to 2.7%, from 2.9% seen in July and 3.8% in January, adding that it sees a 25% probability that growth will slow to less than 2%. The impact of the Fed’s monetary policy tightening will be felt globally, with the dollar’s strength versus currencies in emerging and developing markets adding to inflation and debt pressures.
Germany is aware steps are needed to make Europe stronger in the face of the energy crisis, and the question of joint debt issuance remains open, Spanish Economy Minister Nadia Calvino said. The European Union must again apply the “unity and solidarity” it adopted to tackle the Covid crisis, she said in an interview with Bloomberg Television in New York.
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