Kristalina Georgieva, managing director of the International Monetary Fund (IMF), projected global growth to remain around 3% over the next five years, marking the weakest medium-term growth projection since 1990 and well below the 3.8% average from the past two decades. “With rising geopolitical tensions and still-high inflation, a robust recovery remains elusive,” Georgieva said in a recent speech in Washington. That’s on top of the recent pressures in the banking sector that have made the global inflation fight that much more complex, she added.
Source: Financial Times’
The sub 3% growth projection this year is generally consistent with the IMF’s 2.9% estimate in January, the 2.7% estimate in October, and the 2.8% estimate announced just last week. Advanced economies are expected to weigh the most on global growth, particularly in the US and Europe where rising borrowing costs have hurt demand. The IMF sees 90% of advanced economies posting a decline in their growth rate in 2023. By contrast, emerging economies are a “bright spot” as India and China together are expected to account for 50% of this year’s global growth.
Georgieva commented on central banks’ inflation fight in the wake of global banking issues, asking them to “stay the course” in lowering inflation as long as financial pressures stay limited. While she implied that central banks should keep monetary policy restrictive until price stability is achieved, she urged them to “address financial stability risks when they emerge through appropriate provision of liquidity”. However, if turmoil in the banking system worsened, she said central banks may have to outright cut rates.
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