Finance Minister Enoch Godongwana and Reserve Bank Governor Lesetja Kganyago will lead South Africa’s delegation to the Spring meetings of the International Monetary Fund (IMF) and World Bank in Washington DC, United States (US) this week.

This comes as the leaders of both institutions raised alarm at the impact of the ongoing war in the Middle East, with the IMF Chief Kristalina Georgieva warning that the fund would cut its global growth forecast, while the World Bank President Ajay Banga pointed to broader concerns, including a deepening global unemployment crisis that could hit developing countries the worst over the next decade.

Georgieva says the global lender was expecting near-term demand for IMF financial support to rise between 20 and 50 billion dollars as a result of the spill-overs from the war in the Middle East, a third shock to the global economy in recent years following the COVID-19 pandemic and the war in Ukraine.

She says, “So, what hit us? A supply shock that is large, with the world’s daily oil flow cut by some 13% and its LNG (Liquefied Natural Gas) flow by some 20%. It is global, with all of us now paying more for energy, and with supply chains disrupted around the world.”

‘OUR WORLD WOULD HAVE BEEN A BETTER PLACE’

Georgieva says, “In fact, had it not been for this shock, the world would have been in such a better place that we would have been upgrading our growth projections. But now, even in our most hopeful scenario, we would have a downgrade. Why? Because of significant infrastructure damage, supply disruptions, losses of confidence, and other scarring effects. They’re already baked in.”

The IMF will release a range of scenarios in its World Economic Outlook (WEO) this week, going from a relatively swift normalisation to a scenario that sees oil and gas prices remaining much higher for much longer.

Georgieva is urging developed countries not to make matters worse.

She says, “The reality is we don’t truly know what the future holds for transits through the Strait of Hormuz or for that matter, for the full recovery of regional air traffic. What we do know is that growth will be slower, even if the new peace is durable, and certainly, one way in which they can help is please don’t make matters worse. So I appeal to all countries to reject go-it-alone actions. Export controls, price controls, and so on, that can further upset global conditions. Don’t pour gasoline on the fire. You need this gasoline to drive your cars.”

LOOMING JOB CRISIS

While the Mideast war will dominate discussions in Washington this week, the World Bank is warning that a looming job crisis could see a massive 800 million job creation deficit in developing countries over the next 10 to 15 years.

Banga says, “Fiscal headroom in public spaces cannot be relied upon to be the job creation engine of the coming period. The reality is 90% of jobs are created in the private sector. The overwhelming majority of them are created in micro, small, and medium-sized enterprises.”

“ We need to think about those people and their ability, and the entrepreneurs that they breed, and the chance that young people can get from the creative economy and entrepreneurship and all that, and make that work in a virtuous cycle.”

He says, “ The problem is we can’t do this alone. We’ve got to get the snowball to roll downhill, gathering a lot of snow as it goes along, to reach that amazing number of 800 million (global job shortfall number). That’s the gap we’re looking at.”

G20 MEETING

Godongwana confirmed that his delegation would not attend the G20 Finance Ministers and Central Bank Governors’ meetings at the IMF on Thursday.

He says his delegation had not been accredited to the G20 sessions hosted by the US on the sidelines of this week’s Spring meetings amid continued tensions between Washington and Pretoria.

That aside, the focus this week is on building prosperity through policy as countries seek to navigate the latest rupture in the world order, given geopolitical tensions and the growing risks to inflation, the resulting impacts on interest rates and what that brings to bear on already stressed emerging market economies.