Salah-Eddine Taleb: IMFC Statement

Statement by Mr Salah-Eddine Taleb, Governor of the Bank of Algeria, on behalf of the Islamic Republic of Afghanistan, Algeria, Ghana, Islamic Republic of Iran, Libya, Morocco, Pakistan and Tunisia, at the forty-sixth meeting of the International Monetary and Financial Committee, IMF Autumn Meetings, Washington DC, 13-14 October 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Since our last meeting, the global economy has weakened further and its prospects have become more uncertain, reflecting the three recent major overlapping, connected and mutually reinforcing global crises: the lingering supply-demand imbalances of the pandemic; the fallout from the war in Ukraine; and soaring inflation. The "cost-of-living crisis" has hit vulnerable countries everywhere and vulnerable groups in every country, including the middle class, the hardest. To be clear, the underlying global price pressures, particularly food and energy, were already evident in late 2021, but were sharply accentuated by sanctions and disruptions caused by the war in Ukraine. Virtually all risks identified by the April 2022 WEO materialized, but the inflation surprise seemingly blindsided policymakers in major countries, compelling them to move aggressively to tighten monetary policy. The negative spillovers of the tightening of global financial conditions are being acutely felt in Emerging Market and Developing Economies (EMDEs), including the frontier economies and middle-income countries in our constituency, through currency depreciation, capital outflows, higher external debt servicing cost, and diminished (or even loss of) access to international financial markets. The withdrawal of pandemic-related relief measures in major economies and the economic slowdown in China also weakened external demand and, together with the lingering supply chain constraints, contributed to the slowdown in global trade. The recent geopolitical developments have also caused major trade disruptions, tilting policies towards greater self-reliance or "friend-shoring" among the advanced economies (AEs) in order to protect their supply chains. The medium-term scarring effects of the pandemic on the products and labor markets and productivity, yet to be fully assessed, also weigh on growth. The October 2022 WEO has pared down growth projections for the fourth consecutive time since last year with a clear possibility of further downgrades if the geopolitical risks are not diminished quickly and materially. We are increasingly concerned that the current geopolitical risks will turn into lasting geopolitical fragmentation, posing serious threats to global trade, capital flows, technology transfer and climate policy cooperation.