The head of the International Monetary Fund said Thursday that the world economy has proven surprisingly resilient in the face of higher interest rates and the shock of war in Ukraine and Gaza, but “there is plenty to worry about,” including stubborn inflation and rising levels of government debt.
Quick Read
- Global Economic Resilience: IMF head Kristalina Georgieva noted the world economy has shown resilience despite high interest rates and conflicts in Ukraine and Gaza, yet concerns remain.
- Inflation Concerns: While global inflation has decreased, it remains persistent, complicating efforts to stabilize economies, particularly in the U.S. where strong growth has paradoxically slowed the reduction of inflation rates.
- Rising Government Debt: Global government debt has increased to 93% of the world’s economic output, up from 84% in 2019, driven by pandemic response expenditures.
- Fiscal Resilience Call: Georgieva urged nations to build fiscal resilience by enhancing tax collection and spending efficiency in preparation for potential future crises.
- Economic Growth Forecasts: The IMF predicts global economic growth of 3.2% for 2023, with similar growth expected in 2025, though these figures are weak historically compared to the 3.8% average from 2000 to 2019.
- Productivity and Economic Growth: The sluggish global growth is partly due to disappointing productivity improvements, with inefficient integration of workers and technology and a tendency for non-competitive firms to survive due to previously low interest rates.
- Labor Market Dynamics: An aging labor force in many countries is contributing to slower economic growth due to reduced dynamism.
- U.S. Productivity and Recommendations: The U.S. has seen stronger productivity gains compared to Europe, benefiting from easier market access for innovations and lower energy costs. Georgieva suggested that economies could be stimulated by reducing bureaucratic red tape and increasing female workforce participation.
The Associated Press has the story:
IMF’s Georgieva: There’s ‘plenty to worry about’ despite recovery for many economies
Newslooks- WASHINGTON (AP) —
The head of the International Monetary Fund said Thursday that the world economy has proven surprisingly resilient in the face of higher interest rates and the shock of war in Ukraine and Gaza, but “there is plenty to worry about,” including stubborn inflation and rising levels of government debt.
“ Inflation is down but not gone,” Kristalina Georgieva told reporters at the spring meeting of the IMF and its sister organization, the World Bank. In the United States, she said, “the flipside” of unexpectedly strong economic growth is that it ”taking longer than expected” to bring inflation down.
Georgieva also warned that government debts are growing around the world. Last year, they ticked up to 93% of global economic output — up from 84% in 2019 before the response to the COVID-19 pandemic pushed governments to spend more to provide healthcare and economic assistance. She urged countries to more efficiently collect taxes and spend public money. “In a world where the crises keep coming, countries must urgently build fiscal resilience to be prepared for the next shock,” she said.
On Tuesday, the IMF said it expects to the global economy to grow 3.2% this year, a modest upgrade from the forecast it made in January and unchanged from 2023. It also expects a third straight year of 3.2% growth in 2025.
The world economy has proven unexpectedly sturdy, but it remains weak by historical standards: Global growth averaged 3.8% from 2000 to 2019.
One reason for sluggish global growth, Georgieva said, is disappointing improvement in productivity. She said that countries had not found ways to most efficiently match workers and technology and that years of low interest rates — that only ended after inflation picked up in 2021 — had allowed “firms that were not competitive to stay afloat.”
She also cited in many countries an aging “labor force that doesn’t bring the dynamism’‘ needed for faster economic growth.
The United States has been an exception to the weak productivity gains over the past year. Compared to Europe, Georgieva said, America makes it easier for businesses to bring innovations to the marketplace and has lower energy costs.
She said countries could help their economies by slashing bureaucratic red tape and getting more women into the job market.
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