Kristalina Georgieva, head of the International Monetary Fund, said Sunday that advanced economies will have to exhibit increased vigilance going forward, since now the risks to financial stability have increased, though she noted that the actions which have been taken so far have gone a long way to relieve the stresses on the markets.
The managing director of the IMF noted that she expects global economic growth to slow to below 3% due to after-effects from the pandemic, the war in Ukraine, and the tightening monetary policy of central banks across the globe, making 2023 another challenging year.
Speaking at the China Development Forum, she added that even though 2024 appears to have a better outlook, economic growth is still expected to remain below the historical average of 3.8%, with the overall outlook remaining quite weak.
Next month the IMF, which had predicted global growth would reach 2.9% this year, will release updated forecasts.
Georgieva noted that vigilance will continue to be required, even though the policymakers in advanced economies had all responded decisively to the stability risks which arose as a result of the wave of bank collapses.
She said, “So, we continue to monitor developments closely and are assessing potential implications for the global economic outlook and global financial stability,” noting the IMF would continue to pay close attention to those countries it deemed most vulnerable, mostly due to particularly low income levels, or high levels of debt.
She also warned that the coming stresses threatened to divide the world into rival economic blocs, which would result in, “a dangerous division that would leave everyone poorer and less secure.”
She went on to note that the global economy could draw hope from China’s strong economic rebound, as its GDP was projected to grow to 5.2% in 2023, and would account for roughly one third of the economic growth globally for the year.
She continued to point out that the IMF calculates that every percentage point increase in growth of China’s GDP will produce a 0.3% increase in the growth of other Asian economies.
Given that, she urged China’s policymakers to work swiftly to raise productivity and shift their economy away from investment-based growth, and toward a more durable consumption-driven growth. She said it should include using market-oriented reforms, to offer private sector enterprises equal opportunities to those enjoyed by state-owned enterprises.
She predicted such reforms would increase real GDP by up to 2.5% by 2027, and by 18% by 2037.
She also pointed out that rebalancing China’s economy would assist the nation attain its climate goals, as a focus on consumption-led growth would reduce energy demand, which would reduce the emissions of climate-changing greenhouse gasses.
She went on to predict the shift toward consumption-led growth would reduce CO2 emissions by 15% over the course of 30 years, with a fall in emissions globally of 4.5% during that period.
