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    IMF Lowers Growth Outlook Amid Financial System Tremors

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    The International Monetary Fund says a painful slowdown, which could include a recession, has become a bigger risk for the global economy.WASHINGTON — The world economy faces the increasing risk of a painful slowdown amid worries about the global banking system and concerns that rising interest rates could force banks to curtail lending, the International Monetary Fund said on Tuesday.The warning follows weeks of turmoil in the global banking sector, which included two bank failures in the United States and UBS’s takeover of Credit Suisse, brokered by the Swiss government. Fears that bank runs would ripple through the financial system have abated in recent weeks, but concerns that additional bank failures and tightening lending standards could slow economic output around the world remain.In its latest World Economic Outlook report, the I.M.F. made a slight reduction to its growth forecast for 2023, lowering it to 2.8 percent, from 2.9 percent in January. Growth for the year is expected to be much slower than the I.M.F. predicted a year ago, when it projected output of 3.4 percent.Growth projections for Japan, Germany and India were all lowered since the start of the year, when the I.M.F. said a global recession would most likely be avoided.The I.M.F. and the World Bank have both raised alarms in recent weeks that the global economy is facing a period of extended stagnation. The I.M.F. expects growth to hover around 3 percent for the next five years, which is its weakest medium-term growth forecast since 1990.On Tuesday, the I.M.F. expressed optimism that a financial crisis could be averted, but it lamented that inflation was still elevated and that the global economy remained fragile, facing a “rocky” road ahead. It suggested that a so-called hard landing, which could entail economies around the world tipping into recession, was increasingly plausible.“A hard landing — particularly for advanced economies — has become a much larger risk,” the I.M.F. report said, adding, “The fog around the world economic outlook has thickened.”Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said hopes for stronger growth hinged partly on China’s reopening after strict Covid-19 regulations.How Hwee Young/EPA, via ShutterstockThe dimmer forecast comes as top economic officials from around the world are convening in Washington this week for the spring meetings of the I.M.F. and World Bank. The gathering is taking place at a moment of high uncertainty, with Russia’s war in Ukraine grinding on, prices around the world remaining stubbornly high and debt burdens in developing countries raising unease about the possibility of defaults.Treasury Secretary Janet L. Yellen is expected to meet with other international regulators this week to assess the state of the global financial system. On Tuesday, she expressed confidence in the U.S. banking system and the health of the economy, explaining that she continues to believe that the outlook is brighter than what many economists predicted last fall.“Here at home, the U.S. banking system remains sound, with strong capital and liquidity positions,” Ms. Yellen said during a news conference. “The global financial system also remains resilient due to the significant reforms that nations took after the financial crisis.”Ms. Yellen said she remained “vigilant” to the risks facing the economy, pointing to recent pressures on banking systems in the United States and Europe and the potential for more fallout from Russia’s war in Ukraine. She is not currently seeing evidence that credit is contracting, she added, but acknowledged that it was a possibility.“I’m not anticipating a downturn in the economy, although, of course, that remains a risk,” Ms. Yellen said.Treasury Secretary Janet Yellen expressed confidence on Tuesday in the strength of the U.S. economy but acknowledged that a downturn remained possible.Yuri Gripas for The New York TimesThe I.M.F. made a small upgrade to its projection for U.S. output, which is now expected to be 1.6 percent for 2023.Economists are still working to assess what effects the bank failures might have on the broader U.S. economy. Analysts at Goldman Sachs wrote in a research note this week that bank stress could reduce lending by as much as six percentage points and that small businesses, which rely heavily on small and midsize banks, could bear the brunt of tighter lending.The I.M.F. attributed the strain on the financial sector to banks with business models that relied heavily on a continuation of low interest rates and failed to adjust to the rapid pace of increases in the last year. Although it appears that the turbulence in the banking sector might be contained, the I.M.F. noted that investors and depositors remained highly sensitive to developments in the banking sector.Unrealized losses at banks could lead to a “plausible scenario” of additional shocks that could have a “potentially significant impact on the global economy” if credit conditions tighten further and businesses and households have an even harder time borrowing.“The risks are again heavily weighted to the downside and in large part because of the financial turmoil of the last month and a half,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said at a briefing ahead of the report’s release.In the most severe scenario, in which global credit conditions tighten sharply, the I.M.F. projected that global growth could slow to 1 percent this year.Mr. Gourinchas noted that the financial system was not the only cloud hanging over the global economy. Hopes for stronger growth have been hinging on China’s reopening after strict pandemic regulations, and changes to that policy could slow output and disrupt international commerce, he said. At the same time, Russia’s war in Ukraine continues to threaten the reliability of food and energy supply chains.Last month, the I.M.F. approved a $15.6 billion loan package for Ukraine, the first such financing program for a country involved in a major war.Emile Ducke for The New York TimesThe I.M.F. has been playing a leading role in trying to stabilize the Ukrainian economy, and last month it approved a $15.6 billion loan package for Ukraine, the first such financing program for a country involved in a major war. But despite the efforts by Western nations to buttress Ukraine and weaken Russia, the I.M.F. raised its outlook for the Russian economy, projecting it will grow 0.7 percent this year and 1.3 percent in 2024.The I.M.F. noted that Russia’s energy exports continued to be robust, allowing it to support its economy through government spending. The impact of efforts by the United States and Europe to cap the price of Russian oil at $60 a barrel remains unclear because global oil prices have been falling amid recession fears. I.M.F. officials said that because of lower oil prices, Russian oil was no longer trading at as much of a discount and that Russia had been successful at finding ways to circumvent the price cap.Even as it underscored the risks facing the global economy, the I.M.F. urged central banks to maintain their efforts to contain prices while standing ready to stabilize the financial system, noting that inflation is still too elevated relative to their targets.Despite the I.M.F.’s warnings about a hard landing, Ms. Yellen sought to open this week’s meetings with a note of optimism. She pointed to signs that inflation is diminishing and the resilience of the financial system as reasons for hope.“I wouldn’t overdo the negativism about the global economy,” Ms. Yellen said. “I think we should be more positive.”She added: “I think the outlook is reasonably bright.” More

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    Global Economy May Be in a ‘Lost Decade,’ World Bank Warns

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    Adding to crises like the pandemic, recent stress in the banking system is a new threat to world growth, experts at the organization said.WASHINGTON — The World Bank warned on Monday that the coronavirus pandemic and Russia’s war in Ukraine had contributed to a decline in the global economy’s long-term growth potential, leading to what could be a “lost decade” that would mean more poverty and fewer resources to combat the impact of climate change.The warning comes as the world deals with overlapping crises — a pandemic that crippled economies and strained public health systems and Russia’s invasion of Ukraine, which disrupted global supply chains and hurt international trade ties. The threat of a more protracted slump coincides with new signs of stress in the world’s financial system as a series of banking crises threaten to undermine economic growth.The World Bank projected in a new report that average potential global output is poised to fall to a 30-year low of 2.2 percent per year between 2023 and 2030. That would be a sharp decline from 3.5 percent per year during the first decade of this century.The falloff will be even more pronounced for developing economies, which grew at an average annual rate of 6 percent from 2000 to 2010; that rate could decline to 4 percent this decade.“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics. “The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times — stubborn poverty, diverging incomes and climate change.”Officials at the World Bank said the “golden era” of development appeared to be coming to an end. They warned that policymakers would need to get more creative as they tried to address global challenges without being able to rely on the rapid economic expansions of countries such as China, which has long been an engine of worldwide growth.They suggested that international monetary and fiscal policy frameworks should be more closely aligned, and that world leaders needed to find ways to reduce trade costs and increase their labor force participation. A return to faster growth, they said, will not be easy.Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased.”Jing Xu/Reuters“It will take a herculean collective policy effort to restore growth in the next decade to the average of the previous one,” the World Bank said in the report.The increasing frequency of global crises continues to weigh on output even as signs of an economic rebound emerge. Efforts by central banks to tame inflation by raising interest rates have fueled turmoil in the banking sector, leading to the failures of Silicon Valley Bank and Signature Bank in the United States this month and the rescue of Credit Suisse by UBS.Top economic officials have been watching to see if the strain on the banking system will become a significant economic headwind that could tip the United States into a recession.“It definitely brings us closer right now,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said of a recession on the CBS program “Face the Nation” on Sunday. “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch.”Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased” and that given high levels of uncertainty, policymakers must remain vigilant. She noted that the recent turmoil could have implications for the I.M.F.’s global economic outlook and financial stability report, which will be released in the next few weeks.“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies,” Ms. Georgieva said at the China Development Forum.The I.M.F. said in January that it believed a global recession could be avoided as growth began to rebound later this year. At the time, it projected that output would be more resilient than previously anticipated, and it upgraded its growth projections for 2023 and 2024, but it did warn that “financial stability risks remain elevated.”World Bank officials said that if the current banking turmoil spiraled into a financial crisis and recession, then global growth projections might be even weaker because of the associated losses of jobs and investment.“However you look at it, if the current situation gets worse and turns into a recession, especially a recession at the global level, that could have negative implications for long-term growth prospects,” said Ayhan Kose, director the World Bank’s Prospects Group and the lead author of the report. More

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    Biden’s World Bank Pick Looks to Link Climate and Development Goals

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    Ajay Banga will begin a monthlong “global listening tour” to drum up support for his nomination to be the bank’s next president.The Biden administration’s nominee to be the next president of the World Bank, the international development and climate institution, is embarking on a monthlong sprint around the globe to solidify support for his candidacy.It will be the first opportunity for the nominee, Ajay Banga, to share his vision for the bank, which has been aiming to take on a more ambitious role in combating climate change while maintaining its core commitment to alleviating poverty.Mr. Banga, who has had a long career in finance, faces the challenge of convincing nations that his decades of private-sector experience will help him transform the World Bank.He will begin his “global listening tour” on Monday with stops in Ivory Coast and Kenya, the Treasury Department said on Friday. In Ivory Coast, he will meet with senior government officials, leaders of the African Development Bank and civil society organizations. In Kenya, he will visit the Kenya Climate Innovation Center and a World Bank-backed project that helps local entrepreneurs find ways to address climate change.Mr. Banga will focus on how finding development solutions can be intertwined with climate goals and emphasize his experience working on financial inclusion in Africa, where he helped expand access to electronic payments systems while chief executive of Mastercard, a Treasury official said.The whirlwind campaign will also take Mr. Banga to Asia, Latin America and Europe.The White House nominated him last week after the unexpected announcement last month that David Malpass will step down as World Bank president by the end of June, nearly a year before the end of his five-year term. Mr. Malpass, who was nominated by President Donald J. Trump, ignited a controversy last year when he appeared to express skepticism about whether fossil fuels contribute to global warming.During a briefing at the Treasury Department this week, Mr. Banga made clear that he had no doubts about the causes of climate change. “Yes, there is scientific evidence, and it matters,” he said.Careful to strike a balance between the bank’s growing climate ambitions and its poverty-reduction goals, Mr. Banga emphasized that both issues were interconnected and equally important.“My belief is that poverty alleviation, or shared prosperity, or all those words that essentially imply the idea of tackling inequality, cannot be divorced from the challenges of managing nature in a constructive way,” Mr. Banga added.The World Bank’s nomination process runs through March 29, and other countries may offer candidates. But by tradition, the United States, the bank’s largest shareholder, selects an American to be its president. The executive board hopes to choose a new president by early May.A climate protest in Munich on Friday. Mr. Banga will focus on how finding development solutions can be intertwined with climate goals.Anna Szilagyi/EPA, via ShutterstockIf approved by the board, Mr. Banga will face an array of challenges. The world economy is slowly emerging from three years of pandemic and war that have slowed global growth and worsened poverty. Emerging economies face the prospect of a cascade of defaults in the coming years, and the World Bank has been vocal in calling for debt reduction.The Biden administration has pointed to China, one of the world’s largest creditors, as a primary obstacle in debt-restructuring efforts. Mr. Banga was careful not to be critical of China and said he expected to travel there in the coming weeks.“Today I’m the nominee of the United States, but if I’m lucky enough to be elected, then I represent all the countries who are part of the bank,” Mr. Banga said on Thursday. “Having their points of view known, understood and openly discussed — maybe not agreed to, but openly discussed — is an important part of leading a multilateral institution.”His nomination has won both praise and skepticism from climate activists and development experts.Some climate groups have lamented Mr. Banga’s lack of direct public-sector experience and expressed concern about his affiliation with companies that invest in the oil and gas industries.“Many question whether his history at global multinationals such as Citibank, Nestlé, KFC and Mastercard will prepare him for the huge challenges of poverty and inequality,” Recourse, a nonprofit environmental organization, said in a statement this week. Recourse has been critical of the World Bank’s policies on gas transition, its exposure to coal and its pace of action on climate change.Other prominent activists have praised Mr. Banga, including Vice President Al Gore, who predicted that he would bring “renewed leadership on the climate crisis to the World Bank.”And others viewed Mr. Banga as a natural choice to bridge the gap between the bank’s broad mandates.“Throughout discussions of the World Bank’s evolution, borrowing countries have consistently communicated that financing for climate should not come at the expense of other development priorities,” Stephanie Segal, a senior fellow with the Economics Program at the Center for Strategic and International Studies, wrote in an essay this week. “In nominating Banga, whose candidacy does not lead with climate, the United States has signaled agreement that the bank’s development mandate cannot be abandoned in favor of a ‘climate only’ agenda.”The Biden administration has also faced questions about why it did not choose a woman to lead the bank, which has had only men serve as its full-time president.Mr. Banga asserted that as someone who was born and educated in India, he would bring diversity and a unique perspective to the World Bank. He also emphasized that at Mastercard, he had demonstrated a commitment to empowering women and elevating them to senior roles.“I think that you should credit the administration with taking a huge leap forward into finding somebody who wasn’t born here, wasn’t educated here,” Mr. Banga said. “I believe that giving people a level playing field is our job.”He added: “And that means whether you’re a woman, your color, your sexual orientation, growing up on the wrong side of the tracks, it doesn’t matter.” More

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    Herman Daly, 84, Who Challenged the Economic Gospel of Growth, Dies

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    Perhaps the best-known ecological economist, he faulted his mainstream peers for failing to account for the environmental harm growth can bring.Herman Daly, who for more than 50 years argued that the economic gospel of growth as synonymous with prosperity and progress was fundamentally, and dangerously, flawed because it ignored its associated costs, especially the depletion of natural resources and the pollution it engenders, died on Oct. 28 in Richmond, Va. He was 84.The death, at a hospital, was caused by a brain hemorrhage, his daughter Karen Daly Junker said.Dr. Daly, an ecological economist, was almost surely his field’s chief popularizer through his more than a dozen books and many journal articles, his faculty positions at the University of Maryland and, earlier, Louisiana State University, and his somewhat incongruous six-year stint at the World Bank.Although he was branded a heretic for his theories — or, worse, ignored — among traditional economists, he had plenty of adherents, who saw him as prophetic for anticipating climate change’s increasingly harmful impact and the vast sums of money needed to address it.“His ideas are really relevant now, unlike most other economists, whose ideas tend to lose relevance as time passes and circumstances change,” Peter A. Victor, an ecological economist and the author of the 2021 biography “Herman Daly’s Economics for a Full Word,” said in a phone interview.One of Dr. Daly’s key principles was that growth is “uneconomic” when its costs outweigh its benefits. That idea was tied to another: Earth, once empty, is now full — of people and what they produce — and charting a more sustainable path requires the use of fewer natural resources and the making of less waste.“That’s not really hard to understand,” Dr. Daly said in a 2011 video interview with WWF Sweden. “I can explain that to my grandchildren.”Yet another foundational concept was that the economy does not exist apart from the Earth’s biosphere but within it, and that its scale is limited by its reliance on finite natural resources.Such propositions might seem simple, but arguing against economic growth, Dr. Daly wrote in a foreword to Mr. Victor’s book, was like poking “a big hornets’ nest with a short stick.”“It rudely upsets a very large and comfortable consensus,” he added.He urged politicians, governments and other economists to abandon the relentless pursuit of growth in favor of a so-called steady-state economy, which would achieve a stable balance between supporting human life and preserving the environment. He employed an aircraft metaphor to explain his preferred approach.“The failure of a growth economy to grow is a disaster,” he told The New York Times Magazine in a profile of him this year. “The success of a steady-state economy not to grow is not a disaster. It’s like the difference between an airplane and a helicopter. An airplane is designed for forward motion. If an airplane has to stand still, it’ll crash. A helicopter is designed to stand still, like a hummingbird.”He proposed replacing gross domestic product with metrics like an “index of sustainable economic welfare,” which would tally not just the value of goods and services produced but also the ecological harm done in the process. To him, “sustainable growth” was nonsensical; “sustainable development” was the goal.In an interview, Joshua Farley, an economist and co-author with Dr. Daly of “Ecological Economics: Principles and Applications” (2004), boiled his colleague’s animating philosophy down concisely: “More isn’t always better.”Dr. Daly’s economic beliefs were grounded in hard sciences like the laws of thermodynamics, but also in ethical ideals, like the fair distribution of wealth, and in his faith as a Methodist who saw the Earth as the handiwork of an almighty creator.Even as his theories gained currency in recent years, they remained outside economic thinking’s mainstream. He did not seem to mind.“My duty is to do the best I can and put out some ideas,” he said in The Times Magazine interview. “Whether the seed that I plant is going to grow is not up to me. It’s just up to me to plant it and water it.”Dr. Daly received the Right Livelihood Award, which is sometimes called an alternative Nobel Prize, in 1996.Eric Roxfelt/Associated PressHerman Edward Daly was born on July 2l, l938, in Houston to Edward Joseph Daly, who owned a service station in Beaumont, Texas, where the family lived at the time, and Mildred (Herrmann) Daly, a homemaker who had worked as a bookkeeper before marrying. The family later moved to Houston, where Ed Daly opened a hardware store.Shortly before Herman turned 8, he contracted polio, which rendered his left arm useless. After unsuccessful efforts to repair it over several years, he opted for amputation when he was about to enter high school.“As traumatic as this was, it stopped me from wasting my time hoping I would recover and saved me from using lots of energy going through treatment that would be of little or no benefit,” he wrote in a 2014 personal history. “This painful experience taught me to concentrate on what I am able to do and not waste energy on things that I can’t do.”After graduating from high school in 1956, he entered what was then known as the Rice Institute (now Rice University) in Houston. When the time came to declare a major, he chose economics because, he said, he felt it merged science and the humanities.“As he later discovered,” Dr. Victor wrote in his biography, “that turned out not to be true.”Dr. Daly earned his bachelor’s degree in 1960 and then enrolled in a doctorate program at Vanderbilt University with a focus on development in Latin America.Two people he met while at Vanderbilt would play major roles in his life.One, his original thesis adviser, the Romanian mathematician and economist Nicolas Georgescu-Roegen, helped lay the groundwork for what became ecological economics with his 1971 book “The Entropy Law and the Economic Process,” which argued that all natural resources are permanently degraded when used for economic activity.The other was Marcia Damasceno, a Brazilian college student whom he married in 1963. Along with his daughter Karen, she survives him, as do another daughter, Terri Daly Stewart; his sister, Denis Lynn (Daly) Heyck, professor emeritus of Spanish language and literature at Loyola University Chicago; and three grandchildren.By the time Dr. Daly received his doctorate from Vanderbilt in 1967, he was teaching at L.S.U. There, he began to focus more closely on the interconnections between the economy, the environment and ethics, with an emphasis on the steady-state principles articulated by the 19th-century British economist John Stuart Mill. Dr. Daly published his first book, “Toward a Steady-State Economy,” in 1973. Dr. Daly’s 1996 book “Beyond Growth: The Economics of Sustainable Development,” one of some 20 he wrote detailing his theories.He remained at L.S.U. until 1988, when, in an unlikely move, he joined the World Bank in Washington as a senior economist in the environment department. “It was a big surprise for me that the World Bank, whose basic policy was economic growth, offered me a job,” he wrote.While there, he developed his “three rules for sustainable development” and worked with others to try to change the bank’s system for measuring G.D.P. to reflect environmental costs. The efforts, he wrote, were “to little or no avail.” He moved to the University of Maryland’s School of Public Policy in 1994, taking emeritus status in 2010.Dr. Daly’s other notable books include “For the Common Good: Redirecting the Economy Toward Community, the Environment, and a Sustainable Future” (1989), written with the theologian John B. Cobb Jr.John Fullerton, a former commercial banker who now leads the Capital Institute, a research organization based in Stonington, Conn., whose work is aligned with the book’s prescriptions, is among those who have been influenced by “For the Common Good.”In an interview, Mr. Fullerton said one of Dr. Daly’s most important contributions was his focus on “a pursuit of development that was not physical to achieve prosperity.” Another, he said, was to argue that traditional approaches to finance and economics “lead us off a cliff.”Kirsten Noyes contributed research. More

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    IMF Warns Rate Increases Could Spur A Global Recession

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    The International Monetary Fund lowered its growth outlook for 2023 and suggested that interest rate increases could spur a harsh global recession.The International Monetary Fund said on Tuesday that the world economy was headed for “stormy waters” as it downgraded its global growth projections for next year and warned of a harsh worldwide recession if policymakers mishandled the fight against inflation.The grim assessment was detailed in the fund’s closely watched World Economic Outlook report, which was published as the world’s top economic officials traveled to Washington for the annual meetings of the World Bank and the I.M.F.The gathering arrives at a fraught time, as persistent supply chain disruptions and Russia’s war in Ukraine have led to a surge in energy and food prices over the last year, forcing central bankers to raise interest rates sharply to cool off their economies. Raising borrowing costs will probably tame inflation by slowing business investment and consumer spending, but higher rates could also yield a new set of problems: a cascade of recessions in rich nations and debt crises in poor ones.There are growing fears among policymakers that a so-called soft landing will elude the global economy.“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” the International Monetary Fund report said.The organization maintained its most recent forecast that the global economy will grow 3.2 percent this year but now projects that will slow to 2.7 percent in 2023, slightly lower than the fund’s previous estimate. Both figures are big comedowns from the start of the year, when the fund projected global growth of 4.4 percent in 2022 and 3.8 percent in 2023, highlighting how the outlook has darkened in recent months.Inflation is expected to peak later this year and decline to 6.5 percent in 2023 from 8.8 percent in 2022.“The risks are accumulating,” Pierre-Olivier Gourinchas, the International Monetary Fund’s chief economist, said during an interview in which he described the global economy as weakening. “We’re expecting about a third of the global economy to be in a technical recession.”The fund defines a “technical recession” as an economy that contracts for two consecutive quarters.Corporate America and Wall Street are already bracing for a downturn. Jamie Dimon, the chief executive of JPMorgan Chase, told CNBC on Monday that the United States was likely to be “in some kind of recession six to nine months from now.”Despite the dire tone of the International Monetary Fund’s forecasts, some private forecasters are predicting worse. The median economist in a Bloomberg survey expects 2.9 percent global growth this year and 2.5 percent next, as the euro area posts 0.2 percent growth in 2023 and Eastern Europe sees output fall.The I.M.F. report detailed how the economies of the United States, China and the 19 nations that use the euro are in various states of slowing, with effects rippling around the world.In the United States, inflation and rising interest rates are sapping consumer spending power, and housing activity is slowing as mortgage rates rise. A recent three-month dip in gasoline prices gave consumers some relief from inflation, but prices have started to rise again. There are concerns that trend could continue after the oil production cut announced last week by the international cartel known as OPEC Plus.The fund forecast that the U.S. economy would grow 1.6 percent this year, a downgrade from its previous projection, and 1 percent in 2023.In China, lockdowns to prevent the spread of Covid-19 continue to drag on its economy, which is projected to grow 3.2 percent this year after expanding 8.1 percent in 2021. Beyond its pandemic restrictions, China is facing a crisis in its property sector as cash-constrained homeowners refuse to repay loans on unfinished properties. The International Monetary Fund warned that China’s housing crunch would spill into the country’s domestic banking sector.Europe has been heavily reliant on Russia for energy and is facing sharp increases in oil and gas prices as additional sanctions go into effect later this year, just as the weather turns colder. Tourism has buttressed many of the economies of Europe in 2022, but uncertainty about energy prices has slowed manufacturing activity.Efforts to respond to inflation have led to policy proposals that have caused their own upheaval. Britain’s financial markets have faced turmoil after investors rebuffed the tax and spending policies of Prime Minister Liz Truss and her new government. The Bank of England stepped up its intervention in Britain’s bond market on Tuesday, the second expansion of its emergency measures in two days, as it warned of a “material risk” to the nation’s financial stability.Although Russia is responsible for much of the jump in food and energy prices, its economy is holding up better than previously projected even in the face of robust international sanctions. Russia’s economy is expected to contract 3.4 percent this year and 2.3 percent in 2023, much less than many economists believed earlier in the year.International Monetary Fund officials attributed that to the resilience of its energy exports, which have allowed Russia to stimulate its economy and prop up its labor market. Still, Russia is facing a deep recession, and its economic output is far lower than before the war.The impact of Russia’s invasion of Ukraine was top of mind as policymakers gathered in Washington.Janet L. Yellen, the Treasury secretary, condemned Russia’s actions during a meeting on Tuesday of finance ministers who convened to discuss the global food crisis. Russia’s finance minister, Anton Siluanov, attended the meeting virtually.“Putin’s regime and the officials who serve it — including those representing Russia at these gatherings — bear responsibility for the immense human suffering this war has caused,” Ms. Yellen said, according to a copy of her remarks provided by a Treasury Department official.Ms. Yellen called on the Group of 20, which represents the world’s major economies, to step up financial assistance to nations facing food shortages and said she would support a freeze on debt repayment for countries that needed it.The slowdowns in advanced economies are putting pressure on emerging markets, many of which were already fragile and facing high debt burdens as they recovered from the pandemic. Higher interest rates, soaring food costs and diminished demand for exports threaten to push millions of people into poverty. And low vaccination rates in places such as Africa mean that the health effects of the pandemic are persistent.“The poor are hurt the most,” David Malpass, the president of the World Bank, told reporters before this week’s meetings. “We’re in the midst of a crisis-facing development.”The rapid appreciation of the U.S. dollar, which is the strongest it has been since the early 2000s, also represents a threat to emerging markets. The International Monetary Fund urged policymakers in those countries to “batten down the hatches” and conserve their reserves of foreign currencies for when financial conditions worsen.As the pain piles up in rich and poor countries alike, policymakers are under increasing pressure to blunt the fallout, with central bankers — including those at the Federal Reserve — facing calls to curtail interest rate increases.Still, the fund warned that doing too little to combat inflation would make the fight more costly later. It also said governments should avoid enacting fiscal policies that would make inflation worse.In its report, the fund acknowledged that its forecasts faced considerable uncertainty. The further withdrawal of Russian gas supplies to Europe could depress the continent’s economies, debt crises in developing countries could worsen, and the pandemic could come roaring back.“Risks to the outlook remain unusually large and to the downside,” the report said.Jeanna Smialek More

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    Yellen Says Aim Is ‘Maximum Pain’ for Russia Without Hurting U.S.

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    WASHINGTON — Treasury Secretary Janet L. Yellen said on Wednesday that the United States would continue taking steps to cut Russia off from the global financial system in response to its invasion of Ukraine and argued that the sanctions already imposed had taken a severe toll on the Russian economy.She addressed the House Financial Services Committee as the United States rolled out a new array of sanctions on Russian banks and state-owned enterprises and on the adult children of President Vladimir V. Putin. The White House also announced a ban on Americans making new investments in Russia no matter where those investors are based.“Our goal from the outset has been to impose maximum pain on Russia, while to the best of our ability shielding the United States and our partners from undue economic harm,” Ms. Yellen told lawmakers.The measures introduced on Wednesday included “full blocking” sanctions against Sberbank, the largest financial institution in Russia, and Alfa Bank, one of the country’s largest privately owned banks.Sberbank is the main artery in the Russian financial system and holds over a third of the country’s financial assets. In February, the Treasury announced limited sanctions against Sberbank, but Wednesday’s sanctions, a senior Biden administration official said, will effectively freeze relations between the bank and the U.S. financial system.The administration also announced sanctions against two adult daughters of Mr. Putin: Katerina Tikhonova and Maria Putina, who has been living under an assumed name, Maria Vorontsova. Others connected to Russian officials with close ties to Mr. Putin will also face sanctions, including the wife and daughter of Russia’s foreign minister, Sergey Lavrov, and members of Russia’s security council, including former Prime Minister Dmitri Medvedev. The official said those people would be effectively cut off from the U.S. banking system and any assets held in the United States.President Biden said on Wednesday that the new sanctions would deal another blow to the Russian economy.“The sense of brutality and inhumanity, left for all the world to see unapologetically,” Mr. Biden said, describing Russia’s actions as war crimes. “Responsible nations have to come together to hold these perpetrators accountable, and together with our allies and our partners we’re going to keep raising the economic costs and ratchet up the pain for Putin and further increase Russia’s economic isolation.”Experts suggested that the latest round of sanctions were unlikely to compel Mr. Putin to change course. Hundreds of American businesses have pulled out of Russia in recent weeks, making new investments unlikely.“The asset freezes on the additional banks aren’t nothing, but this isn’t the most significant tranche we’ve seen to date,” said Daniel Tannebaum, a partner at Oliver Wyman who advises banks on sanctions.Other American agencies are joining the effort to exert pressure on Russia.In a news conference on Wednesday, officials from the Justice Department and the F.B.I. also announced a series of actions and criminal charges against Russians, including the takedown of a Russian marketplace on the dark web and a botnet, or a network of hijacked devices infected with malware, that is controlled by the country’s military intelligence agency.Justice Department officials also celebrated the seizing of the Tango, a superyacht owned by the Russian oligarch Viktor F. Vekselberg, and charged a Russian banker, Konstantin Malofeev, with conspiring to violate U.S. sanctions. Mr. Malofeev is one of Russia’s most influential magnates and among the most prominent conservatives in the country’s Kremlin-allied elite. (The indictment renders his surname as Malofeyev.)At the hearing, Ms. Yellen told lawmakers that she believed Russia should be further isolated from the geopolitical system, including being shut out of international gatherings such as the Group of 20 meetings this year, and should be denounced at this month’s meetings of the International Monetary Fund and the World Bank. She added that the United States might not participate in some G20 meetings that are being held in Indonesia this year if Russians attended.Ms. Yellen, whose department has been developing many of the punitive economic measures, rebutted criticism that the penalties leveled so far had not been effective, in part because there are some exceptions to allow Russia to sell energy.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    U.S. and Allies Will Strip Russia of Favored Trade Status

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    WASHINGTON — President Biden and other Western leaders moved on Friday to further isolate Russia from the global trading system, saying they would strip the country of normal trade relations and take other steps to sever its links to the world economy in response to President Vladimir V. Putin’s invasion of Ukraine.The measures, which were announced jointly with the European Union and other Group of 7 countries, would allow countries to impose higher tariffs on Russian goods and would prevent Russia from borrowing funds from multilateral institutions like the International Monetary Fund and the World Bank.Mr. Biden also moved to cut off additional avenues of trade between the United States and Russia, barring lucrative imports like seafood, vodka and certain diamonds, which the White House estimated would cost Russia more than $1 billion in export revenues per year.The United States will also restrict exports to Russia and Belarus of luxury items like high-end watches, vehicles, alcohol, jewelry and apparel. The European Union announced its own set of bans, including barring imports of Russian iron and steel.The restrictions add to a growing list of economic barriers that much of the developed world has put in place on Russia, whose economy is already suffering as a result. The ruble has lost nearly half its value over the past month, food prices are soaring and Russia is in danger of defaulting on its sovereign debt. Its stock market has remained closed since the war began.Mr. Biden said on Friday that the moves “will be another crushing blow to the Russian economy.” He said Russia was “already suffering very badly” from the sanctions, adding that the West’s economic pressure was a reason the Russian stock market had not reopened.“It’ll blow up” once it opens, Mr. Biden predicted.The White House has been under pressure in recent days to respond to Russian attacks in Ukraine, including the shelling of hospitals, other buildings and civilian evacuation routes. The White House has warned that Russia may also use chemical weapons against Ukrainians, but it has repeatedly said that Mr. Biden will not send American troops into the fray.Instead, the administration has focused on ratcheting up economic pressure. Earlier in the week, Mr. Biden banned imports of Russian oil, gas and coal and imposed restrictions on U.S. energy investments in Russia.The move to strip Russia of its preferential trade status would allow some of its biggest trading partners to impose higher tariffs on Russian goods. The Group of 7 countries, which also include Canada, Britain, France, Germany, Italy and Japan, purchased about half of Russia’s exports in 2019.Russia’s preferential trade status is conveyed by its membership in the World Trade Organization, whose rules require that all members grant each other “most favored nation” trading status in which goods can flow between countries at lower tariff rates.Taking away that status — which the United States calls “permanent normal trade relations” — would most likely have a much larger impact for the European Union, which is Russia’s largest trading partner and a major importer of Russian fuel, minerals, wood, steel and fertilizer.In the United States, the move would carry heavy symbolism, but it could have a limited economic impact compared with other sanctions that have already been imposed, according to trade experts.Chad P. Bown, a senior fellow at the Peterson Institute for International Economics, said the measure would raise U.S. tariffs on Russian products to an average of about 32 percent from 3 percent.“However, the trade impact on Russia of such a tariff hike would be small, as the United States is not a particularly sizable export destination for Russian products,” he said. Russia was the 20th-largest supplier of goods to the United States in 2019, sending mainly energy products and minerals.And many of those goods would be subject to far lower tariffs — in some cases none at all — as a result of a decades-old trade law that would kick into place if the preferential trade status were revoked.Each country will follow its own domestic process to make this change, the Biden administration said. The European Union has begun to pave the way for higher tariffs on Russian goods, but the bloc’s 27 member countries must agree on how to carry that out. Canada announced last week that it would withdraw most favored nation tariffs for both Russia and Belarus, a close Russian ally.In the United States, the task falls to Congress, which had been pressuring the administration to consider such a move.House Democrats proposed two weeks ago to strip Russia of its trading status and begin a process to expel the country from the World Trade Organization. This week, top Democratic and Republican lawmakers said they would include the measures in a bill to penalize Russia, but at the White House’s request, Democrats ultimately stripped out the provision to remove Russia’s special trading status. The bill passed the House on Wednesday but has yet to pass the Senate.“It was taken out because the president wants to talk to our allies about that action, which I think is appropriate,” Representative Steny H. Hoyer, Democrat of Maryland and the majority leader, told reporters this week.Speaker Nancy Pelosi said on Friday that the House would take up legislation next week to formalize the revocation of Russia’s trading status.“It is our hope that it will receive a strong, bipartisan vote,” she said.If approved, the measure would add to an array of harsh sanctions already announced by the United States and its allies. Western governments have reduced their energy trade with Russia, frozen the assets of Russian officials and oligarchs, and cut off the country from the dollar-denominated global financial system.An icebreaker cut a path for a cargo ship near the Franz Josef Land archipelago in Russia last year. The move to strip Russia of its preferential trade status would allow some of its biggest trading partners to impose higher tariffs on Russian goods. Emile Ducke for The New York TimesGovernments have also banned exports of advanced technology and transactions with Russia’s central bank. On Friday, the Bank for International Settlements, which provides banking services to the world’s central banks, said it was no longer conducting transactions with Russia. And the Treasury Department placed new economic sanctions on three immediate family members of Mr. Putin’s spokesman, along with 12 members of the Russian Duma and the management board of VTB Bank, which has already been sanctioned.The Treasury Department said it was specifically targeting a plane and a yacht of the Russian billionaire Viktor F. Vekselberg, which together are worth an estimated $180 million. Mr. Vekselberg is an ally of Mr. Putin, the department said.The Russian government has fired back by announcing it would place its own restrictions on its exports, including of raw materials.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More