IMF says risks to financial stability have increased, calls for vigilance

Kristalina Georgieva, head of the International Monetary Fund, stated on Sunday that although competition stress has been reduced by actions by advanced economies, dangers to financial stability have increased and that continued vigilance is necessary.

The IMF managing director reaffirmed her assessment that 2023 would be another difficult year, with global growth slowing to below 3 % as a result of the pandemic’s scarring, the conflict in Ukraine, and tightening monetary policy.

She stated at the China Development Forum that even with a better outlook for 2024, global growth will continue to be weaker than its historical average of 3.8 %.

The IMF is expected to launch new projections last month after predicting a 2.9 % increase in global growth this year.

In the midst of lender collapses, Georgieva claimed that policymakers in advanced economies had quickly responded to financial stability risks, but even so, vigilance was still required.

She added that the IMF was paying close attention to the most vulnerable countries, especially low-income countries with high levels of debt, and that” we continue to monitor developments closely and are assessing significant implications for the worldwide economic vision and global financial stability.”

She added that” a dangerous sector that would make everyone poorer and less secure” could result from geo-economic separation, which could divide the world into rival economic blocs.

According to Georgieva, China’s robust economic recovery, with a projected GDP growth of 5.2 % in 2023, provided some hope for the world economy because it is anticipated that it will account for about one-third of global growth.

According to the IMF, every 1 percentage point increase in China’s GDP growth is accompanied by a 0.3 % point increase in growth in many Asian markets.

She urged Chinese politicians to work to increase efficiency and rebalance the economy away from choice and toward more long-term consumption-driven growth, including through market-oriented reforms to level the playing field between the corporate sector and state-owned businesses.

According to Georgieva, such measures may increase actual GDP by as much as 2.5 % by 2027 and by about 18 % by the year 2037.

Rebalancing China’s economy, according to her, may also help Beijing achieve its climate goals because switching to consumption-driven growth would lower energy demand, lower emissions, and ease energy security pressures.

She claimed that by doing this, carbon dioxide emissions could be cut by 15 % over the following 30 years, leading to a 4.5 % drop in global emissions during that time.

( Writing by Andrea Shalal, reporting by Joe Cash and Xu Jing, and editing by Edwina Gibbs)

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