site.btaIMF Managing Director Georgieva: Inflation Retreats, High Price Level to Stay

Tight monetary policies have worked without breaking the back of the global economy and have brought a sense of relief, said International Monetary Fund (IMF) Managing Director Kristalina Georgieva at the Annual Meetings of the IMF and the World Bank Group in Washington.

In her remarks, Georgieva said that inflation is in retreat. “From 5.7% in the fourth quarter of last year, our World Economic Outlook sees global inflation falling to 5.3% in the current quarter and further to 3.5% in Q4 2025 - with a faster decline in advanced economies.”

But not even if inflation is coming down, the new and higher price level is here to stay, Georgieva warned, adding that the world now faces a low growth – high debt trajectory.

"We project world GDP to grow at an anemic average rate of 3.2% per year over the next five years—just look at how our forecasts have been revised lower and lower over the years.

At the same time, we forecast global public debt to keep rising—with a risk that it could exceed our baseline projection by as much as 20% of world GDP in a severe but plausible negative scenario. A hundred trillion dollars in government debt worldwide. Higher interest payments are eating up a growing slice of fiscal revenues, especially in low-income and emerging market countries."

Against this background, spending priorities include outlays related to climate and demography and, in emerging market and low-income countries, investment to close development gaps.

Georgieva said that the world is fracturing, and trade is no longer the powerful engine of growth that it used to be. The retreat from global economic integration—driven by both national security concerns and the anger of those who lost out from it—is visible in a mushrooming of industrial policy measures, trade barriers, and protectionism.

Georgieva advised IMF members first, to shift toward rebuilding fiscal buffers; second, to invest in growth-enhancing reforms; and third, to work together to tackle global challenges.

With monetary policy easing, fiscal consolidation should start now. Multi-year fiscal plans should lay out consolidation paths tailored to country-specific situations.
Governments face a dilemma—more accurately, a “trilemma”—of large spending needs, political redlines on taxation, and the need to rebuild buffers, according to Georgieva.

In parallel with fiscal consolidation, countries must launch ambitious reforms to lift their growth potential. Higher growth not only helps create well-paid jobs but also eases the fiscal trilemma by generating higher tax revenues.

The IMF Managing Director also outlined assistance provided to IMF members.