The head of the International Monetary Fund issued a warning on Thursday that high debt levels and low economic growth continue to be significant obstacles for the global economy. IMF Managing Director Kristalina Georgieva informed CNBC that despite noteworthy progress in the global economic recovery, governments have become overly reliant on borrowing, compounded by “anemic growth,” which complicates debt servicing challenges.
Georgieva emphasized that it is premature to celebrate economic recovery. She highlighted that the main challenges ahead involve low growth and high debt, areas where improvement is essential. While she praised major central banks for their efforts in controlling inflation, she pointed out that these achievements are not universal. Some economies continue to grapple with high prices, leading to social and political dissatisfaction.
She noted that while successful, major economies have effectively managed inflation, there are still regions where inflation remains problematic. The lingering impact of higher prices contributes to a sense of dissatisfaction and anger among people in various countries.
These observations come as finance ministers and central bank governors anticipate their upcoming meeting in Washington, DC, for the 2024 annual meetings of the IMF and the World Bank Group. Discussions will cover topics such as the global economic outlook, poverty eradication, and the transition to green energy.
Georgieva also cautioned that international trade may no longer serve as the “engine of growth” it once was, due to the rise of restrictive policies in many economies. The U.S. and the European Union have implemented punitive tariffs against China, citing Beijing’s unfair trade practices.
She explained that pressures are mounting in the United States and elsewhere due to perceptions that globalization has not been beneficial, leading to job losses and unmet community needs. Factors such as the pandemic’s impact and Russia’s aggression against Ukraine have elevated national security priorities, causing increased mistrust and prompting advanced economies to lead in industrial and protectionist measures.
The IMF managing director has previously warned against such restrictions, stating in June that the increasing adoption of tariffs is detrimental to international development. On Thursday, she reiterated this stance, insisting that “retaliatory” trade measures could negatively affect both implementers and targets.
Georgieva advised careful consideration of the costs and benefits of tariffs, noting that their impact is often borne by businesses and consumers in the implementing country.
Earlier that day, Georgieva highlighted broader geopolitical tensions as a significant risk to global financial stability. She expressed concern over the expanding conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets during her curtain raiser speech.
