Risks to financial stability have increased, calls for vigilance
‘Think the unthinkable’: IMF chief warns world is a very different place after crises like Covid.
The head of the International Monetary Fund, Kristalina Georgieva, said on Sunday that risks to financial stability had increased and called for continued vigilance, although actions in advanced economies had calmed tensions in the markets.
The managing director of the IMF reiterated her view that 2023 will be another difficult year, with global growth slowing to less than 3% due to the scars of the pandemic, the war in Ukraine and monetary tightening.
Even with a better outlook for 2024, global growth will remain well below its historical average of 3.8% and the overall outlook will remain weak, she said at the China Development Forum.
The IMF, which has forecast global growth of 2.9% this year, is expected to release new forecasts next month.
Georgieva said policymakers in advanced economies reacted decisively to financial stability risks in the wake of bank meltdowns, but even then vigilance was called for.
“We therefore continue to monitor developments closely and assess the potential implications for the global economic outlook and global financial stability,” she said, adding that the IMF was paying particular attention to the most vulnerable countries, in particular low-income countries with high levels. debt.
She also warned that geo-economic fragmentation could split the world into rival economic blocs, leading to “a dangerous division that would make everyone poorer and less secure”.
Georgieva said China’s strong economic rebound, with projected GDP growth of 5.2% in 2023, offered some hope for the global economy, with China expected to account for around a third of global growth in 2023.
The IMF estimates that every 1 percentage point increase in GDP growth in China leads to a 0.3 percentage point increase in growth in other Asian economies, she said.
She urged Chinese policymakers to work to increase productivity and rebalance the economy away from investment and towards more sustainable consumption-led growth, including through market-oriented reforms to level the playing field between the private sector and public enterprises.
Such reforms could increase real GDP by 2.5% by 2027 and about 18% by 2037, Georgieva said.
She said rebalancing China’s economy would also help Beijing achieve its climate goals, as the shift to consumption-driven growth would cool energy demand, reduce emissions and ease pressures on energy security.
This, she said, could reduce carbon dioxide emissions by 15% over the next 30 years, driving global emissions down by 4.5% over the same period.