Market Analysis

World Bank and IMF meetings marred by wars, sluggish economic expansion, and the US election

Amos Simanungkalit · 21 Oct 20245.1K Views

Global finance leaders will gather in Washington this week amid heightened uncertainty due to ongoing conflicts in the Middle East and Europe, China's struggling economy, and concerns over a tight U.S. presidential race that could lead to new trade disputes and weaken international cooperation.

The International Monetary Fund (IMF) and World Bank annual meetings are set to attract over 10,000 participants from finance ministries, central banks, and civil society groups. They will address issues such as stimulating uneven global growth, managing debt crises, and financing the transition to green energy.

However, a central concern looming over the discussions is the potential outcome of the U.S. presidential election on November 5. A win by Republican candidate Donald Trump could disrupt the global economic order with the introduction of new U.S. tariffs, increased borrowing, and a shift away from climate cooperation.

"The most critical issue for the global economy—the U.S. election—is not officially on the agenda, but it's on everyone's mind," said Josh Lipsky, a former IMF official and current head of the Atlantic Council's GeoEconomics Center. He added that the election outcome could significantly influence trade policy, the future of the U.S. dollar, and the selection of the next Federal Reserve chair, all of which would have global repercussions.

If Democratic candidate Kamala Harris wins, she is expected to continue the Biden administration's efforts to restore multilateral cooperation on climate change, tax policies, and debt relief.

The meetings, which commence on Monday and intensify later in the week, will likely be the final ones for U.S. Treasury Secretary Janet Yellen, who has been instrumental in the Biden administration's multilateral economic initiatives. Yellen has indicated that she plans to retire from public service at the end of Biden's term in January.

Trade tensions, especially those involving China, will be a prominent topic at the meetings. The Biden administration’s imposition of higher tariffs on Chinese electric vehicles, semiconductors, and solar products has underscored rising anti-China sentiment and the shift toward industrial policies in wealthy nations.

SLOWING GROWTH OUTLOOK

On Tuesday, the IMF will release updated global growth projections. IMF Managing Director Kristalina Georgieva recently pointed to a sluggish outlook, warning of slow medium-term growth due to high levels of debt. She highlighted areas of resilience, particularly in the U.S. and India, which are offsetting weaknesses in China and Europe.

Although debt defaults among low-income countries may have peaked, discussions at the meetings are expected to focus on liquidity shortages. Many emerging markets are postponing development investments due to high debt service costs and diminishing foreign aid.

Last year's IMF and World Bank meetings took place in Morocco as Hamas launched an attack on Israel, sparking a conflict that has resulted in more than 40,000 deaths, primarily in Gaza. The economic impact has largely been confined to the region, affecting Gaza, the West Bank, Israel, Lebanon, Egypt, and Jordan.

Georgieva warned that a broader escalation of the conflict could significantly disrupt oil and gas supplies, posing a greater threat to the global economy.

Support for Ukraine will also be a prominent issue, as the G7 nations seek to finalize a $50 billion loan backed by frozen Russian assets. This loan is seen as a safeguard against a potential Trump victory, as Trump has suggested withdrawing U.S. support for Ukraine.

Despite these concerns, IMF and World Bank officials plan to focus on their core missions during the meetings, which also mark the 80th anniversary of the institutions' creation at Bretton Woods in 1944.

World Bank President Ajay Banga emphasized the need to accelerate project preparations that utilize the bank’s expanded lending capacity and to refine a new scorecard aimed at improving development outcomes.

"The world is what it is right now," Banga told reporters last week. "Rather than rehash the problems, I want these meetings to focus on actionable solutions from our institutions."