On Sunday, the head of the International Monetary Fund, Kristalina Georgieva, stated that although actions taken by advanced economies have calmed market stress, risks to financial stability have still increased, and therefore called for ongoing vigilance.
The managing director of the International Monetary Fund restated her belief that 2023 will be a difficult year, as global growth is expected to decrease to less than 3% due to the lingering effects of the pandemic, the conflict in Ukraine, and the implementation of tighter monetary policies.
At the China Development Forum, Georgieva stated that although there is a better outlook for global growth in 2024, it will still be significantly below the historic average of 3.8%. Additionally, she noted that the overall outlook remains weak.
Next month, the International Monetary Fund (IMF) is set to release its new forecasts, after having previously predicted global growth of 2.9% for this year. IMF Chief Kristalina Georgieva stated that while policymakers in advanced economies have responded swiftly to financial stability risks following bank collapses, continued vigilance is still necessary.
She said the IMF was closely monitoring developments and assessing potential implications for the global economic outlook and financial stability, with particular attention being paid to vulnerable countries, especially low-income countries with high levels of debt.
In addition, Georgieva cautioned against geo-economic fragmentation that could divide the world into competing economic blocs, resulting in a hazardous division that would negatively affect everyone’s economic security and prosperity.
According to Georgieva, China’s projected GDP growth of 5.2% in 2023 and its strong economic rebound offer a glimmer of hope for the global economy. She noted that China is expected to contribute around one-third of global growth in 2023.
Georgieva highlighted that according to IMF estimates, a 1% increase in China’s GDP growth leads to a 0.3% increase in growth in other Asian economies. She urged Chinese policymakers to focus on raising productivity and shifting the economy towards sustainable consumption-driven growth. This can be achieved through market-oriented reforms that promote a level playing field between private and state-owned enterprises.
According to Georgieva, implementing market-oriented reforms to achieve a level playing field between the private sector and state-owned enterprises could raise real GDP by 2.5% by 2027 and around 18% by 2037. She further added that rebalancing China’s economy towards consumption-driven growth could help Beijing achieve its climate goals by reducing energy demand, lowering emissions, and easing energy security pressures.
She stated that such efforts could lead to a 15% decrease in carbon dioxide emissions over the next three decades, which would result in a global emissions decline of 4.5% over the same period.