Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), issued a warning on Thursday regarding the significant obstacles of high debt and low growth facing the global economy. In her discussion with CNBC, Georgieva acknowledged the strides made in economic recovery globally but pointed out that governments have become overly reliant on borrowing. This dependency, compounded by what she described as “anemic growth,” poses significant challenges for debt servicing.
Georgieva emphasized that it is not time to celebrate yet. She identified low growth and high debt as major challenges that require improvement. Although she praised major central banks for their efforts to control inflation, she noted that success has not been uniform across all economies. Some regions continue to grapple with elevated prices, leading to increased social and political dissatisfaction.
She highlighted the success of major economies in combating inflation while recognizing that certain areas still face persistent inflation issues. The continued impact of higher prices has left many individuals feeling worse off and frustrated.
These comments were made ahead of the upcoming 2024 annual meetings of the IMF and the World Bank Group, where finance ministers and central bank governors will congregate in Washington DC. The discussions will focus on various topics, including global economic prospects, poverty eradication, and the transition to green energy.
Georgieva cautioned that international trade might not serve as the “engine of growth” it once was, owing to the rise of restrictive trade policies in many countries. She referred to actions by the U.S. and the European Union, which have imposed tariffs on China due to perceived unfair trade practices by Beijing.
The IMF managing director addressed the pressures experienced in the U.S., and elsewhere, from individuals who feel globalization has failed them, causing job losses and lack of community support. Concerns about national security, exacerbated by the pandemic and geopolitical tensions such as Russia’s aggression against Ukraine, have heightened these issues. Advanced economies are increasingly adopting protectionist and industrialist measures.
Georgieva has previously spoken against these restrictions, cautioning about the negative impact of increasing tariffs on international development. On Thursday, she reiterated this viewpoint, warning that retaliatory trade measures could harm both those who implement them and their intended targets.
She advised a careful evaluation of the costs and benefits of such measures, emphasizing that tariffs often end up impacting businesses and consumers in the implementing country. Additionally, Georgieva pointed to geopolitical tensions as a crucial risk to global financial stability, expressing concern over the expanding conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets.
