The head of the IMF mentioned yesterday that the global economy is performing better than expected despite facing prolonged uncertainty and modest growth prospects in the medium term. International Monetary Fund Managing Director Kristalina Georgieva stated that the world economy is surpassing fears but falling short of necessary levels. She emphasized that global growth is anticipated to slightly decrease this year and next, supported by favorable conditions in the United States and other advanced, emerging market, and developing nations.
Georgieva’s comments preceded the upcoming meeting of finance ministers and central bank governors at the World Bank and IMF in Washington. The focus at the annual gatherings is likely to be on trade issues following the implementation of significant tariffs by US President Donald Trump earlier this year.
Georgieva pointed out that the world economy has managed to withstand various shocks due to improved policy fundamentals, private sector adaptability, lower-than-expected tariffs, and favorable financial conditions. She noted that there has been no significant escalation into a trade war so far, despite the ongoing trade tensions.
While the US tariff rate has decreased from 23 percent to 17.5 percent, it remains higher than the global average. Georgieva cautioned that the full impact of these tariffs is yet to be realized, and the resilience of the global economy has not been fully tested.
The IMF projects that global growth will maintain a three percent rate in the medium term, aligning with earlier forecasts but lower than the pre-Covid-19 level of 3.7 percent. Georgieva called for swift actions from countries to boost economic output, fortify fiscal reserves, and address trade imbalances.
The IMF’s recommendations vary by region, with Asia encouraged to enhance internal trade, bolster the service sector, and improve access to finance. Implementing these measures could increase economic output by up to 1.8 percent in the long run. In Africa, Georgieva urged countries to enact business-friendly reforms and continue developing the Continental Free Trade Area to potentially raise real GDP per capita by more than 10 percent.
Georgieva criticized Europe for its sluggish economic growth compared to the US and proposed appointing a new “single market czar” within the European Union to drive reforms and enhance market competitiveness. She advocated for deepening the EU’s single market integration in financial services and energy sectors to catch up with the US’s private sector dynamism.
Georgieva recommended that the US address its federal deficit and promote household savings, while advising China to undertake fiscal reforms to boost private consumption and reduce reliance on industrial policies for economic growth.