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IMF Warns of Weak Global Growth and Persistent Inflation

The International Monetary Fund's (IMF) Managing Director, Kristalina Georgieva, acknowledged the global economy's impressive resilience against multiple shocks. However, it still faces a combination of weak growth and persistent inflation.

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IMF logo

Insufficient Growth for Global Opportunities

Georgieva expressed concern over the IMF's 2023 global growth projection of 2.8%, stating that more is needed to provide opportunities for businesses and individuals worldwide. The prospect of weak growth over an extended period adds to the worries.

Banking System Turmoil Threatens Global Growth

The IMF warned that a significant flare-up of banking system turmoil could reduce global growth to 1%, pushing many economies into recession and stressing emerging market economies.

Policymakers' Dual Task: Inflation and Financial Stability

Georgieva emphasized that policymakers must focus on combating persistent inflation and ensuring financial stability after overcoming the COVID-19 pandemic, high inflation, and spillovers from the war in Ukraine.

Banking Pressures Complicate Economic Recovery

Banking pressures arising from the failures of two U.S. regional banks and the forced sale of global lender Credit Suisse have made the tasks of policymakers more complex.

Prioritizing Inflation Fight over Financial Stability Concerns

Pierre-Olivier Gourinchas, the IMF's chief economist, advised policymakers not to abandon their efforts against inflation due to concerns about financial stability.

Importance of Monitoring Emerging Risks

Georgieva stressed the importance of vigilance regarding emerging risks and urged central banks to address financial stability risks in collaboration with regulators and supervisors.

Lowest Five-Year Global Growth Projection

The IMF issued its lowest five-year global growth projection since 1990, predicting 2.8% growth in 2023, followed by approximately 3% through 2028. Georgieva attributed this to lagging productivity and potential fragmentation of the global economy.

Resilience Despite Increasing Risks

While acknowledging the economy's remarkable resilience, Georgieva warned that the global economy is not in a great position and sees increasing risks. However, she also noted that the situation is not dire, as no recession exists.