IMF chief Kristalina Georgieva Photo: Fadel Senna / AFP / Getty Images
The world is on the verge of a crisis of low economic growth and high debt, which may lead to a reduction in the resources of governments to address pressing social and economic problems. As a result, public discontent will grow.
This was stated by the head of the International Monetary Fund (IMF), Kristalina Georgieva, during a press conference at the annual meeting of the IMF and the World Bank in Washington.
Economic slowdown forecast
“We expect the global economy to grow by 3.2% in 2024, and over the next five years it will slow to 3.1% per annum, which is the lowest medium-term forecast in the last decade,” Georgieva said.
While economic growth remains in positive territory, she noted that the global sense of stability is under threat. According to her, trade is no longer the driver of economic development, and the world is increasingly fragmented economically.
The impact of debt
One of the key issues Georgieva highlighted is global public debt, which will exceed $100 trillion this year, a record high and representing 93% of global GDP. By 2030, this figure is expected to approach 100% of GDP, which means fewer opportunities for investment in addressing long-term challenges such as climate change.
“The world risks being stuck in a situation of low growth and high debt. This will lead to lower incomes, fewer opportunities for job creation and limited resources for social programmes,” Georgieva said.
Solutions
The IMF has outlined two key priorities to address this challenge: ensuring a smooth decline in inflation and tackling the growing debt.
- Inflation: It is important that inflation returns to the target level in all countries. Georgieva noted that central banks, in particular the US Federal Reserve, have already started this process, but it is important to see it through to the end while minimising the impact on the labour market.
- Debt: Measures should be taken to gradually reduce fiscal deficits, restoring the financial buffers that were depleted during the pandemic. According to Georgieva, it is important to start these processes now.
- Reforms: Another important element is reforms aimed at improving governance and economic growth. The IMF believes that such reforms can boost output by up to 8% over four years in developing countries.
Forecast for the coming years
The IMF has updated its forecast that the global economy will continue to grow at 3.2% in 2024 and 2025, but the medium-term forecast remains moderate at 3.1%, significantly lower than pre-quarantine levels.
Rising debt and economic slowdowns pose a serious challenge to governments, which must act quickly to prevent a deterioration in global financial stability.
