International Monetary Fund (IMF) chief Kristalina Georgieva expressed cautious optimism on Thursday, citing heightened demand for services and progress in curbing inflation as positive indicators for the prospects of global economy, potentially averting a recession. Nevertheless, she underscored lingering fiscal and financial vulnerabilities.
In her statement, Georgieva disclosed that the upcoming World Economic Outlook report, slated for release next Tuesday, would reveal a convalescence marked by sluggish and uneven growth, with glaring disparities worldwide. She emphasized that growth rates remained well beneath pre-pandemic benchmarks, and the outlook had dimmed further. Addressing the challenge of inflation, she noted its persistent nature, asserting that its containment mandated a sustained period of elevated interest rates, disproportionately impacting the most economically vulnerable segments of society.
“The world economy has shown remarkable resilience, and the first half of 2023 has brought some good news, largely because of stronger-than-expected demand for services and tangible progress in the fight against inflation,” stated Georgieva in her prepared remarks. “This increases the chances for a soft landing for the global economy. But we can’t let our guard down.”
Among major economies, only the United States has reclaimed pre-pandemic output levels, according to Georgieva. She highlighted bright spots in nations like India and Ivory Coast. Conversely, economic activity in various regions continues to lag projections, with sustained economic disintegration, driven by protectionism and export restrictions, exacerbating the situation.
Georgieva further stressed that banking institutions were confronting mounting pressures, urging immediate action to fortify the global financial safety net. Increased funding for the Poverty Reduction and Growth Trust, alongside the recently established Resilience and Sustainability Trust, was also imperative. Since the onset of the pandemic, the IMF has extended approximately $320 billion in financial support to 96 nations.
Ahead of the annual IMF and World Bank meetings in Marrakech next week, Georgieva called for governments to bolster their financial reserves, urging stronger member countries to augment their funding contributions.
Despite the improving outlook, the IMF chief sounded a cautionary note, warning of the potential resurgence of inflation and the tightening of financial conditions in the global economy. She emphasized that prematurely easing policy measures could yield dire consequences for society’s most vulnerable.
Meanwhile, as Georgieva delivered her address, historic meetings unfolded in Marrakech, not far from the epicenter of a catastrophic earthquake in Morocco, claiming the lives of 2,900 individuals. This, she contended, further underscored the imperative for governments to act swiftly, both in immediate pandemic response and in the pursuit of a more resilient world.