The managing director of the International Monetary Fund (IMF), Kristalina Georgievawarned this Thursday of the “difficult future” that lies ahead, a time of low growth, high debt and geopolitical instability and called on governments to do much more to reverse the situation.
“Governments must work to reduce debt and rebuild buffers for the next shockwhich will surely come, and perhaps sooner than we expect,” he noted in the traditional preliminary speech to the annual meetings of the Fundwhich will be held next week in Washington.
In this meeting, which will bring together ministers, presidents of central banks and other economic authoritiesthe institution will update global growth forecasts, which in July it estimated at 3.2% for this year and in the 3.3% for the next one.
The different presentations, meetings and talks will be a time to take stock of a time that also has good news, Georgieva said. “the great wave of global inflation is receding”thanks to effective monetary policy measures that have not caused a global recession or a large increase in unemployment.
But, “despite the good news,” Georgieva warned, “Don’t expect victory parties next week”well there are three reasons not to celebrate, among them the “difficult” geopolitical environment.
“We are all very concerned about the growing conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets. Its humanitarian impact, along with the prolonged wars in Ukraine and elsewhere, it’s heartbreaking“he said.
Furthermore, he added, in a world of more wars and more insecurity, defense spending may continue to rise and countries, driven by national security concerns, increasingly resorting to protectionism“creating one trade restriction after another.”
“In the future, trade will not be the same engine of growth than before. It is the fracture I warned about in 2019, but worse. “It’s like pouring cold water on an already lukewarm global economy,” he said.
A worrying future
The forecasts are not encouraging either. that point to “an implacable combination of low growth and high debt,” said the Bulgarian economist, who has just begun her second five-year term as managing director of the institution.
Medium-term growth will be “mediocre” and insufficient to eradicate global poverty, create the necessary jobs and generate the tax revenues that governments require. It will be “a difficult” and “worrying” future due to the high and growing public debt.
This week the IMF offered a preview of its Fiscal Monitorwhich he will present in full next week, in which he estimated that the Global public debt exceeds 100 trillion dollars or 93% of global gross domestic product by the end of this year and approaching 100% of GDP by 2030. This represents 10 percentage points of GDP more than before the pandemic (2019).
Furthermore, another reason for not celebrating, he added, is that even if inflation rates fall, “the higher price level that sits in your wallet is here to stay.
Tax reforms, the IMF recipe
Despite the current gloomy outlook, Georgieva recalled that, as her counterpart at the World Bank says, Ajay Banga“forecasts are not destiny” and It is in the hands of governments to do much more.
“We can do better (…) There is much we can and should do to increase our growth potential, reduce debt and build a more resilient global economy,” he said.
Thus, governments must move away from the prevailing popular fiscal expansion and make “difficult decisions.” “Tax reforms are not easybut they are necessary and can improve inclusion and opportunities,” he stated.
Georgieva called for reforms in the labor market, eliminating barriers that prevent the mobilization of capital and carrying out policies to improve productivity, reduce bureaucracy, harness the power of artificial intelligence or boost spending on education, research and development .
In addition to internal reforms, the IMF director noted, Countries have to “look abroad”although today the world is a “distrustful and fragmented” place.
Thus, during the annual meetings, Georgieva plans to call on governments to work together to improve collective prospects. “Let us not take global tensions for granted, but rather, let’s decide to work to lower the geopolitical temperature and attend to tasks that can only be tackled together,” he stated.
On the other hand, in a press conference after the preliminary speech of the annual meetings, Georgieva stated that her expectation was that people would leave there encouraged, but also scared“so that they get to work at full speed,” he said. “I want political leaders to feel afraid of what is coming and act,” added the economist.
#IMF #warns #difficult #future #growth #high #debt
