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HomeTop NewsIMF revises global economic growth to 3.1% from 2.9% previously

IMF revises global economic growth to 3.1% from 2.9% previously

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By Temi Olowu

In a significant update during the G20 Finance Ministers and Central Bank Governors meeting in São Paulo, Brazil, IMF Managing Director Kristalina Georgieva reported a positive projection for global economic growth, forecasting a rise to 3.1% compared to the previous estimate of 2.9%.

Macro-Financial Stability and Risks: Georgieva’s Key Insights

Addressing the attendees, Georgieva expressed optimism about a “soft landing” for the global economy but cautioned that risks persist.

One notable upside is a faster-than-expected decline in inflation, with global headline inflation anticipated to fall to 5.8% this year and 4.4% in the following year.

Georgieva highlighted the positive impact of this improved outlook on developing economies, citing examples like Cote d’Ivoire’s oversubscribed bond issuance.

However, she urged vigilance, pointing out potential risks such as persistent inflation from geopolitical shocks, supply disruptions, and looser financial conditions.

Challenges in Weak Growth, Productivity, and Financial Sector Risks

Despite the positive projections, Georgieva emphasised the need for caution, noting that global growth remains weak at 3%, well below the pre-COVID decade’s average of 3.8%.

Low productivity in many places is a cause for concern, and she urged countries to focus on structural reforms for sustained growth.

Additionally, Georgieva underscored the importance of monitoring financial sector risks, particularly if interest rates remain higher for an extended period. She encouraged early detection of signs of stress and systematic addressing of vulnerabilities, especially in non-banking financial institutions.

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Policymakers’ Dilemma in 2024: Balancing Inflation and Growth

Looking ahead to 2024, Georgieva highlighted the challenges facing policymakers. Central banks must carefully calibrate inflation-fighting measures to avoid negatively impacting growth, while government authorities are urged to pursue fiscal consolidation for resilience against potential shocks. Georgieva advised medium-term fiscal plans to facilitate this consolidation.

Financial Sector for the 21st Century: Navigating Innovations and Risks

Georgieva acknowledged the accelerating pace of financial innovations and their potential benefits and risks. She stressed the IMF’s focus on macro-financial stability and the role of financial innovations in contributing to financial inclusion and growth.

The discussion covered central bank digital currencies (CBDCs), crypto assets, and cross-border payments, emphasising the need for a comprehensive policy and regulatory response.

Inequality and Financing for Development: A Multifaceted Approach

The IMF’s commitment to addressing inequality was emphasized by Georgieva, emphasizing the importance of sound macroeconomic fundamentals, social safety nets, and labor market participation.

She also discussed the significance of an integrated world economy and the opportunities and risks associated with artificial intelligence.

Regarding financing for development, Georgieva highlighted the challenge of losing ground rather than gaining and outlined the IMF’s role in partnership with the World Bank to support members in achieving higher growth rates and improving standards of living.

A comprehensive approach to domestic actions and external support, including addressing debt vulnerabilities, was underscored.

In conclusion, Georgieva highlighted the IMF’s commitment to making a difference by actively engaging with members and international institutions to navigate the complex economic landscape and promote sustainable global growth.

(Edited by Oludare Mayowa; omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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