The global economy is facing significant challenges as high debt levels and sluggish growth continue to hinder recovery efforts, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva. While progress has been made since the pandemic, governments’ reliance on borrowing, coupled with “anemic growth,” is creating difficulties in managing mounting debt.
“It’s not yet time to celebrate,” Georgieva said. “When we look into the challenges ahead of us, the biggest one is low growth, high debt. This is where we can and must do better.” Despite the efforts of central banks to control inflation, not all countries are faring well, with some still grappling with higher prices. Georgieva pointed out that inflation continues to fuel dissatisfaction in many parts of the world, exacerbating social and political unrest.
“It is successful major economies that have done really well … and there are pockets in the world where inflation is still a problem,” she said. “The impact of higher prices remains, and it is making many people in many countries feel worse off and angry.”
The concerns come as world leaders prepare for the 2024 annual meetings of the IMF and the World Bank Group in Washington DC. These meetings will focus on critical global issues, such as the economic outlook, poverty eradication, and the transition to green energy. The discussions will take place against a backdrop of rising geopolitical tensions, trade disputes, and the threat of further economic instability.
Georgieva underscored the diminishing role of international trade as an economic driver, citing the growing use of restrictive policies by major economies. Trade, which once fueled growth, is now subject to protectionism and punitive tariffs, especially between the U.S., European Union, and China. The U.S. and EU have imposed tariffs on China over what they see as unfair trade practices.
“What we are seeing in the United States, but also elsewhere, is pressures from people who understandably feel that globalization did not work for them,” Georgieva explained. “Their jobs disappeared, their communities had not been attended, and concerns on security grounds — mostly grounded in the impact of the pandemic, and the impact of Russia’s aggression against Ukraine — they bring national security priorities up on the list.”
The rise of protectionist measures, particularly among advanced economies, is changing the global trade landscape. These actions, initially led by emerging markets, are now being embraced by developed nations as they prioritize national security over free trade. This shift has generated an environment of mistrust among trading partners, which Georgieva has previously criticized.
In earlier remarks, she warned that the growing trend toward trade restrictions, including tariffs, poses a threat to international development. She emphasized that these measures are often counterproductive, harming the very countries that implement them as much as their targets.
“Retaliatory trade measures could hurt the implementers as much as their targets,” Georgieva said. “Our advice is, carefully look at the costs and benefits and what that may mean in [the] medium term. And of course, we do our part by calculating the cost and benefits, and showing who bears them, because tariffs are usually borne by businesses and consumers in the country that introduces them.”
Adding to the economic uncertainty are the rising geopolitical tensions, which Georgieva identified as key risks to global financial stability. During a recent speech, she raised concerns about the conflict in the Middle East, particularly its potential to disrupt regional economies and global oil and gas markets.
“We are all very worried about the expanding conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets,” Georgieva said, highlighting the far-reaching consequences of such crises.
As global leaders gather to address these pressing issues, the IMF’s message is clear: the world economy remains vulnerable to debt, low growth, and geopolitical risks. Addressing these challenges will require coordinated international efforts, careful policy choices, and a renewed commitment to stabilizing the global financial system.
(Source:www.ft.com)
“It’s not yet time to celebrate,” Georgieva said. “When we look into the challenges ahead of us, the biggest one is low growth, high debt. This is where we can and must do better.” Despite the efforts of central banks to control inflation, not all countries are faring well, with some still grappling with higher prices. Georgieva pointed out that inflation continues to fuel dissatisfaction in many parts of the world, exacerbating social and political unrest.
“It is successful major economies that have done really well … and there are pockets in the world where inflation is still a problem,” she said. “The impact of higher prices remains, and it is making many people in many countries feel worse off and angry.”
The concerns come as world leaders prepare for the 2024 annual meetings of the IMF and the World Bank Group in Washington DC. These meetings will focus on critical global issues, such as the economic outlook, poverty eradication, and the transition to green energy. The discussions will take place against a backdrop of rising geopolitical tensions, trade disputes, and the threat of further economic instability.
Georgieva underscored the diminishing role of international trade as an economic driver, citing the growing use of restrictive policies by major economies. Trade, which once fueled growth, is now subject to protectionism and punitive tariffs, especially between the U.S., European Union, and China. The U.S. and EU have imposed tariffs on China over what they see as unfair trade practices.
“What we are seeing in the United States, but also elsewhere, is pressures from people who understandably feel that globalization did not work for them,” Georgieva explained. “Their jobs disappeared, their communities had not been attended, and concerns on security grounds — mostly grounded in the impact of the pandemic, and the impact of Russia’s aggression against Ukraine — they bring national security priorities up on the list.”
The rise of protectionist measures, particularly among advanced economies, is changing the global trade landscape. These actions, initially led by emerging markets, are now being embraced by developed nations as they prioritize national security over free trade. This shift has generated an environment of mistrust among trading partners, which Georgieva has previously criticized.
In earlier remarks, she warned that the growing trend toward trade restrictions, including tariffs, poses a threat to international development. She emphasized that these measures are often counterproductive, harming the very countries that implement them as much as their targets.
“Retaliatory trade measures could hurt the implementers as much as their targets,” Georgieva said. “Our advice is, carefully look at the costs and benefits and what that may mean in [the] medium term. And of course, we do our part by calculating the cost and benefits, and showing who bears them, because tariffs are usually borne by businesses and consumers in the country that introduces them.”
Adding to the economic uncertainty are the rising geopolitical tensions, which Georgieva identified as key risks to global financial stability. During a recent speech, she raised concerns about the conflict in the Middle East, particularly its potential to disrupt regional economies and global oil and gas markets.
“We are all very worried about the expanding conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets,” Georgieva said, highlighting the far-reaching consequences of such crises.
As global leaders gather to address these pressing issues, the IMF’s message is clear: the world economy remains vulnerable to debt, low growth, and geopolitical risks. Addressing these challenges will require coordinated international efforts, careful policy choices, and a renewed commitment to stabilizing the global financial system.
(Source:www.ft.com)