The Managing Director of the International Monetary Fund, Kristalina Georgieva, warned today in a speech in Beijing about the risks threatening financial stability and urged continued caution despite actions by advanced economies to ease market pressures. Georgieva emphasized her view that 2023 will be another challenging year, with global growth slowing to less than 3 percent due to the pandemic's impact, the war in Ukraine, and tightening monetary policies.
Speaking at the Chinese Development Forum, she noted that even though there is a better outlook for 2024, global growth will remain significantly below its historical average of 3.8 percent, and overall forecasts will remain weak. Georgieva highlighted that policymakers in advanced economies responded decisively to the risks threatening financial stability following the collapse of banks, but vigilance and caution are still needed.
She stated, "Therefore, we are working to assess the potential implications for global economic forecasts and global financial stability," adding that the IMF is paying close attention to countries most vulnerable to risks, particularly low-income countries with high debt levels.
She also warned against the division of the world into competing economic blocs, stating that this would lead to a "dangerous divide that makes everyone poorer and less secure." Georgieva referred to the strong economic recovery in China, which is expected to show GDP growth of around 5.2 percent in 2023, offering some hope for the global economy, as China is anticipated to contribute one-third of global growth in 2023.
She noted that the Fund's estimates indicate that for every one percent increase in GDP growth in China, there is a corresponding increase of 0.3 percent in the growth of other Asian economies. Georgieva urged Chinese policymakers to work on enhancing productivity and rebalancing the economy away from investment, moving towards more sustainable consumption-driven growth, including reforms focused on the market to support equal opportunities between the public and private sectors.
She stated that such reforms could increase real GDP by up to 2.5 percent by 2027 and about 18 percent by 2037. Georgieva mentioned that rebalancing the Chinese economy would also help Beijing achieve its climate goals, as transitioning to consumption-led growth would reduce energy demand, lower emissions, and alleviate related pressures on energy security. She pointed out that this could lead to a 15 percent reduction in carbon dioxide emissions over the next 30 years, which would, in turn, contribute to a 4.5 percent decrease in global emissions during the same period.
