by Andrea Shalal
WASHINGTON (Reuters) – The International Monetary Fund (IMF) expects global economic growth to drop below 3% in 2023 and stay around that mark for the next five years, its managing director Kristalina Georgieva said on Thursday. also evoking increased risks of deterioration in the economy.
The IMF had not published such weak medium-term forecasts since 1990, well below the average growth of 3.8% observed over the past two decades.
As a reminder, growth was 3.4% in 2022.
Strong monetary and fiscal measures in the face of the COVID-19 pandemic and the war in Ukraine have averted a much worse situation in recent years, said Kristalina Georgieva, but growth prospects remain weak due to the inflation.
“While against all expectations labor markets and household spending have shown resilience in most advanced economies, and China’s reopening is encouraging, we expect growth in the global economy will be below 3% in 2023,” the fund’s managing director said in a speech ahead of the IMF and World Bank spring meetings next week.
“As geopolitical tensions escalate and inflation remains high, a strong recovery remains elusive, undermining the outlook for everyone, especially the most vulnerable people and countries.”
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Kristalina Georgieva said India and China are expected to account for half of global growth this year, but around 90% of advanced economies will see their growth rate decline.
It calls on central banks to stay the course in the fight against inflation, as long as financial pressures remain limited, but also to respond to risks to financial stability when they appear, by providing liquidity in an appropriate way.
The upheavals in the banking sector in the United States and Switzerland have highlighted failures in risk management in some institutions and gaps in supervision, she added.
Kristalina Georgieva reminds that it is essential to carefully monitor the risks within banks, non-banking financial institutions and sectors such as commercial real estate.
“Possible latent vulnerabilities…remain a concern, and this is no time for complacency,” she said.
To improve prospects for growth and productivity, Kristalina Georgieva called for major changes, including investments estimated at $1 trillion a year in renewable energy and measures to avoid trade fragmentation, which could reduce by 7 % of world GDP.
(Andrea Shalal; Laetitia Volga, editing by Kate Entringer)
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