Global economy poised for 'weak' 3pc growth: IMF
Global growth is on track to be "historically weak" over the next five years amid rising interest rates, stubbornly high inflation and geopolitical tensions, a top IMF official said today.
Growth is slowing in 90pc of advanced economies as higher interest rates weigh on demand, IMF managing director Kristalina Georgieva said today in a preview of the next World Economic Outlook set for release on 10 April. The IMF plans to project global growth of less than 3pc in 2023, along with global economic growth of around 3pc over the next five years.
"This is our lowest medium-term growth forecast since 1990," Georgieva said during an event held in Washington, DC. "It is well below the average of 3.8pc we had in the pre-Covid decade."
Despite the deary economic outlook, Georgieva said the IMF expects central banks to "stay the course" in their fight against inflation that remains "stubbornly high" due to factors such as tight labor markets and geopolitical tensions such as Russia's war in Ukraine.
"There cannot be robust growth without price stability, nor without financial stability," Georgieva said.
The US Federal Reserve has already raised its target interest rate to 4.75-5pc from near-zero at the start of 2022. The European Central Bank over the same timeframe raised its key lending rate to 3pc from -0.5pc. Those attempts to lower inflation have become "more complex," Georgieva said, because of banking sector pressures that serve as a reminder of the difficulty of transition from periods of low to high interest rates.
The IMF expects to see "some momentum" from emerging economies, with China and India on track to provide half of global growth in 2023, Georgieva said. But she said low-income economies are facing higher borrowing costs at a time of reduced demand for their exports, factors that will make it harder for those countries to catch up with advanced economies.
"Poverty and hunger could further increase," she said. "This is a dangerous trend."
Factors that could bolster growth include higher labor force market participation by women, avoiding economic fragmentation, easing geopolitical tensions, and progress in fighting climate change, Georgieva said.
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