The Managing Director of the IMF has warned that the global economy will experience years of slow growth, with the medium-term outlook being the weakest in more than 30 years.
Kristalina Georgieva, speaking in Washington ahead of the World Bank-IMF Spring Meetings next week, predicted that the global economy will grow at a compound annual rate of about 3% over the next five years.
The figure is well below the average 3.8 percent forecast over the last two decades, and it represents the lowest medium-term growth forecast since 1990.
Globalization has helped boost growth rates and lifted hundreds of millions out of poverty in the decades since. However, as trade protectionism grows and major emerging economies such as China improve, the rate of global economic expansion slows. According to the fund’s chief executive, the main obstacles to growth are increasing economic fragmentation and geopolitical tensions, which are likely themes for next week’s meetings. You’re looking at a screenshot of an interactive graphic. This is most likely due to being offline or having JavaScript disabled in your browser.
“This disaster not only kills innocent people; it also exacerbates the cost of living crisis and brings more hunger around the world,” Georgieva said of Russia’s invasion of Ukraine. There is a risk that the peace dividends we have enjoyed for the past three decades will be lost, adding to trade and financial tensions.
“The path back to robust growth is bumpy and foggy, and the ties that hold us together may be fraying now.”
The weaker outlook would “make it even harder to reduce poverty, heal the economic scars of the Covid crisis and create new and better opportunities for all.”
For the coming quarters, the IMF supports the demands of the OECD and other international organizations that the central banks remain on course with high interest rates. Georgieva said fighting inflation is an important basis for better medium-term economic performance.
The failures of Silicon Valley Bank and Credit Suisse “exposed risk management failures at certain banks, as well as regulatory failures,” she said, but added that “policymakers have been remarkably quick and comprehensive in their actions over the past few weeks.”
