International Monetary Fund Managing Director Kristalina Georgieva said in a speech in Beijing on Sunday that risks to financial stability had increased and called for continued caution despite moves by advanced economies to ease market pressures.
Georgieva confirmed her view that 2023 will be another year full of challenges, with global growth slowing to less than 3% due to the repercussions of the pandemic, the war in Ukraine and tightening monetary policy.
She added at the China Development Forum that even with a better outlook for 2024, global growth would still be well below its historical average of 3.8%, and estimates would remain weak overall.
The IMF, which has forecast global growth of 2.9% for this year, is due to release new estimates next month.
Georgieva said policymakers in advanced economies had dealt decisively with risks to financial stability in the wake of bank failures, but vigilance was still needed.
“Therefore, we continue to closely monitor developments and assess the potential repercussions on the global economic outlook and global financial stability,” she added, adding that the IMF pays close attention to countries most at risk, especially low-income countries with high levels of debt.
She also warned against dividing the world into competing economic blocs, saying that this would lead to “a dangerous division that will make everyone poorer and less secure.”
She pointed out that the strong economic recovery in China, which is expected to record a GDP growth of about 5.2% in 2023, gives some hope to the global economy, as China alone is expected to achieve a third of global growth in 2023.
She stated that the Fund estimates that every 1% increase in GDP growth in China leads to a 0.3% increase in the growth of other Asian economies.
She urged policy makers in China to work to increase productivity, rebalance the economy away from investment, and move towards more sustainable consumption-led growth, including market-focused reforms to support equal opportunities between the public and private sectors.
It said such reforms could raise real GDP by up to 2.5% by 2027 and about 18% by 2037.
She stated that rebalancing the Chinese economy will also help Beijing achieve its climate goals because the transition to consumption-led growth would reduce energy demand, reduce emissions and relieve pressures related to energy security.
She pointed out that this will lead to a 15% reduction in carbon dioxide emissions over the next 30 years, which in turn will lead to a 4.5% reduction in global emissions during the same period.