The International Monetary Fund sees increasing odds that central banks can tame inflation without sending the global economy into recession, while warning the growth outlook remains uneven and weaker than before the pandemic.
The US, the world’s largest economy, has returned to its pre-pandemic path, while India and several other emerging markets stand out as well, Managing Director Kristalina Georgieva said in a speech Thursday. Though she said the recovery has been slow, she highlighted stronger-than-projected demand for services and advances in cooling the rising cost of living.
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“This increases the chances for a soft landing for the global economy,” she said, according to a copy of her prepared remarks. “But we can’t let our guard down.”
An accumulation of shocks since 2020 has cost the world $3.7 trillion in lost output, Georgieva said, and the breakdown of the world into economic blocs threatens to undermine opportunities for growth, particularly in emerging and developing markets, including Africa.
She also flagged the danger from a slowdown in most rich countries and economic activity in China that’s below expectations. Georgieva repeated the Fund’s warning from April that the current pace of global growth remains below the 3.8% average in the two decades before the pandemic, and that medium-term prospects have weakened.
The IMF also expects inflation in some countries to remain above targets until 2025, and urged central banks to avoid prematurely easing monetary policy amid the risks of resurgent inflation.
Georgieva spoke in Abidjan, Ivory Coast, ahead of the institution’s meetings with the World Bank next week in Marrakech, Morocco. The confab is the first in Africa for the Bretton Woods institutions in 50 years.
Africa debt
Georgieva highlighted the continent’s importance to the future of the global economy, and the threat from rising debt levels, which has caused countries from Chad to Zambia to seek to restructure.
The IMF earlier this year, together with Group of 20 presidency and the World Bank, formed the Global Sovereign Debt Roundtable to bring official and private lenders to work out some of the biggest challenges.
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Georgieva noted progress, saying that it took Chad 11 months to move from a staff-level agreement with the IMF to securing the creditor assurances needed for approval of its loan; 9 months for Zambia; 6 months for Sri Lanka; and 5 months for Ghana.
“We would still like to see faster progress, but we’re moving in the right direction,” she said.
Georgieva also said she’s interested in expanding the role of emerging and developing countries at the IMF, including adding a third seat on its executive board to represent Africa. She also repeated a call for nations to agree to increase the IMF’s quota, the term it uses for the resources that all members pay into the organisation and fund its lending.
© 2023 Bloomberg
