BEIJING, March 26 (Reuters) – International Monetary Fund chief Kristalina Georgieva said on Sunday that risks to financial stability have increased and called for continued vigilance, although actions by advanced economies have calmed market stress.
The Managing Director of the IMF reiterated her view that 2023 would be another challenging year, with global growth slowing to below 3% on scars from the pandemic, the war in Ukraine and monetary tightening.
Even with an improved outlook for 2024, global growth will remain well below its historical average of 3.8% and the overall outlook remains weak, she said at the China Development Forum.
The IMF, which has forecast global growth of 2.9% for this year, is due to release new forecasts next month.
Georgieva said policymakers in advanced economies had reacted decisively to risks to financial stability following bank failures, but vigilance was warranted.
“Therefore, we continue to closely monitor developments and assess potential implications for the global economic outlook and global financial stability,” she said, adding that the IMF pays close attention to the most vulnerable countries, particularly low-income and high-level countries Debts.
She also warned that geoeconomic fragmentation could split the world into rival economic blocs, leading to “a dangerous divide that would make everyone poorer and less secure.”
Georgieva said China’s strong economic recovery, with GDP growth forecast at 5.2% in 2023, offers some hope for the global economy as China is expected to account for about a third of global growth in 2023.
The IMF estimates that every 1 percentage point increase in GDP growth in China translates into a 0.3 percentage point increase in growth in other Asian economies, she said.
She called on Chinese policymakers to work to increase productivity and rebalance the economy, away from investment and towards more sustainable, consumption-led growth, including through market-oriented reforms to ensure a level playing field between the private sector create sector and state-owned enterprises.
Such reforms could increase real GDP by up to 2.5% by 2027 and by around 18% by 2037, Georgieva said.
She said rebalancing China’s economy would also help Beijing meet its climate goals, as the move to consumption-led growth would lower energy demand, reduce emissions and ease pressure on energy security.
This could reduce carbon emissions by 15% over the next 30 years, resulting in a 4.5% drop in global emissions over the same period.
Reporting by Joe Cash and Xu Jing; writing by Andrea Shaal; Editing by Edwina Gibbs
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