The global economy is expected to grow at its slowest pace since 1990, with the IMF projecting roughly 3% growth over the next five years, according to Kristalina Georgieva, head of the International Monetary Fund. She warned of a “rough and foggy” path ahead and highlighted the challenges of cooperation to address global economic problems.
Ms Georgieva called for increased support for low-income countries and urged wealthier nations to boost funds for the IMF, which provides low-cost loans to countries in need. The IMF anticipates a wave of requests for help or debt restructuring due to the ongoing shocks from the Covid-19 crisis, the war in Ukraine, and rising living costs.
Global growth dropped to 3.4% last year, nearly halving from the post-pandemic surge in 2021 and below the 3.8% average growth of the last two decades. The slowdown has persisted in 2023, despite strong job markets in countries like the US. The IMF expects growth to dip below 3% in 2023, with India and China accounting for more than half of the projected growth.
Higher borrowing costs, as central banks raised interest rates to stabilize inflation, are expected to impact roughly 90% of advanced economies, weighing on their growth prospects. This comes at a challenging time for low-income countries, as weakened demand for their exports and increased borrowing costs could exacerbate poverty and hunger, which were already heightened by the Covid-19 crisis.
Ms Georgieva emphasized the need for support to vulnerable nations while also urging authorities to continue raising interest rates to combat inflation, as long as financial pressures remain limited. She cautioned that policymakers may face complex trade-offs between inflation and financial stability objectives, and the use of their respective tools if the situation changes.
IMF projects a sluggish global economic growth rate over the next five years, with challenges in cooperation and support for low-income countries. The impact of higher borrowing costs and other global shocks continues to weigh on the global economy, calling for coordinated efforts to address these challenges effectively.