The head of the IMF has warned at the start of the World Economic Forum in Davos that the global economy faces perhaps its “biggest test since the second world war”.
Kristalina Georgieva, IMF managing director, said Russia’s invasion was “devastating lives, dragging down growth and pushing up inflation”, and urged countries not to “surrender to the forces of geoeconomic fragmentation that will make our world poorer and more dangerous”.
Georgieva’s warning came as Ukraine stepped up its bid to give its citizens hope of a brighter future, if the war can be won, with a $1tn package of reconstruction support, financed from confiscating frozen Russian assets.
Speaking on Monday morning at the forum, Yulia Svyrydenko, Ukraine’s deputy prime minister and minister of the economy, said the whole world should get behind Ukraine in supporting its reconstruction and imposing sanctions on Russia.
“There is no room for a neutral position, no time to wait for decisions as this war affects every country,” she added.
Svyrydenko criticised countries and companies that had not imposed or enforced economic sanctions and said the world was suffering from the consequences of Russian aggression through higher food, oil and gas prices.
Calling for a new Marshall Plan plus for reconstruction, she said that it could be financed from the frozen assets of the Russian state and from oligarchs.
“You have these frozen Russian assets all around the world and we need to find a clear solution on how to sell these assets for the reconstruction of Ukraine.”
Recognising that this was not something that had been done before, she justified the stance on Russia financing reconstruction, saying “this is not a conflict . . . it is a war and it includes all countries”.
Ukraine’s former finance minister, Natalie Jaresko, told the Financial Times in Davos that, with bombs raining down every night across Ukraine, the rebuilding costs were likely to be higher than Kyiv’s current estimates of $560bn to $600bn. “I’m putting this at $1tn,” Jaresko said.
Ukraine’s representatives at the World Economic Forum have been adamant that sanctions on Russia should be toughened even if they came with economic costs for other countries.
Ukrainian delegates have expressed frustration with the actions taken by the US and European countries, as well as the lack of measures taken by other big economies, especially India and China.
Svyrydenko said Europe should immediately go ahead with the proposed ban on Russian oil imports and accelerate the move away from Russian gas. “There is no other answer than this: you should launch the second [EU] package of sanctions and ban the purchase of oil and gas from Russia.”
The sanctions have contributed to concerns, however, in the global economy that it is moving into a more turbulent period.
Increasing numbers of economists have become alarmed that the world is sliding towards a recession, with Chinese production falling sharply as it battles coronavirus, Europe suffering from a cost of living crisis, the US moving from boom to bust and emerging markets facing food shortages.
Georgieva urged all countries to lower barriers to trade, help countries in debt distress and modernise cross-border payments systems. But she warned: “There is no silver bullet to address the most destructive forms of fragmentation.”