site.btaHead of IMF: Global Economy Is More Fragmented, Risks Getting Stuck in High Debt and Low Growth

Over the next five years, global economic growth will slow to an average rate of 3.1%, the slowest growth in decades. We are living in a more fragmented global economy, and trade is no longer a driver of growth, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said at the annual meetings of the IMF and the World Bank in Washington on Thursday.

She unveiled the IMF's latest report, "A Global Policy Agenda", which focuses on two priorities: securing a soft landing for economies and getting out of the high debt-low growth path.

"This can be achieved by ensuring that inflation returns to its target levels around the world. Major central banks, including that of the US, have embarked on a path of interest rate cuts. The specific moment now is to complete the task of bringing down inflation without damaging the labour market." Georgieva also pointed out that action must be taken on reducing deficits and debts.

Global government debt is on track to surpass USD 100 trillion this year, representing 93% of gross domestic product (GDP), and is expected to reach 100% of global GDP by 2030, Georgieva said, adding, "The global economy is in danger of remaining stuck on a path of low growth and high debt. This means lower incomes and fewer jobs, but also lower government revenues and less money to support families and tackle long-term challenges like climate change."

In her view, it is critically important for countries to implement reforms that support economic growth - from cutting red tape to improving governance policies.

Reforms are a source of significant benefits for different countries, she said. Such reforms could push up developing countries' economic growth by 8 percentage points within four years, according to IMF projections.

"Continuing cooperation on climate, technology, debt and trade is essential. Action on climate policies and technology is unlocking transformations in the global economy that require a global response," Georgieva said.

On international trade, Georgieva explained that it is "important to preserve the benefits of economic integration and to ensure that they are shared".

At the same time, we need to ensure that trade remains an engine of growth, especially for developing countries that are vulnerable to division and fragmentation.

Commenting on countries' debt obligations, Georgieva also pointed out that progress has been made on the G20 common framework, which aims to speed up debt restructurings.

"Many IMF members still face high interest rates and high debt servicing costs and the resulting liquidity problems," she added.

The IMF will continue to provide financial resources to serve as a buffer to its members, Georgieva stressed.

A record 97 countries have benefited from IMF loans since the pandemic, she said.

For the first time, the IMF has cut fees for its members, and the cost of borrowing has fallen by USD 1.2 billion a year, equivalent to a 36% drop.