‘There’s plenty to worry about in global economy’
IMF Managing Director Kristalina Georgieva warned that government debts are growing around the world
WASHINGTON: 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 is “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 per cent of global economic output — up from 84 per cent 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 the global economy to grow 3.2 per cent 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 per cent growth in 2025.
The world economy has proven unexpectedly sturdy, but it remains weak by historical standards: Global growth averaged 3.8 per cent 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.