The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has warned that the world economy is expected to grow at less than 3% this year. This slowdown in economic activity is due to the ongoing COVID-19 pandemic and the military invasion of Ukraine by Russia. The IMF chief stated that this period of slower economic activity would be prolonged, with the next five years witnessing less than 3% growth. She described this as "our lowest medium-term growth forecast since 1990, and well below the average of 3.8% from the past two decades."
However, Georgieva noted that some momentum comes from emerging economies, particularly Asia. India and China are expected to account for half of global growth in 2023. She explained, "But others face a steeper climb." She also mentioned that after a strong recovery in 2021, the severe shock of Russia's war in Ukraine and its wide-ranging consequences caused global growth in 2022 to drop by almost half, from 6.1 to 3.4%.
Georgieva said that slower growth would be a "severe blow," making it even harder for low-income nations to catch up. She warned that poverty and hunger could further increase, a dangerous trend that was started by the COVID crisis.
Her comments come ahead of next week's spring meetings of the IMF and the World Bank, where policy-makers will convene to discuss the global economy's most pressing issues. The annual gathering will take place as central banks around the world continue to raise interest rates to tame galloping inflation rates.
Georgieva explained that about 90% of advanced economies are projected to see a decline in their growth rates this year. For low-income countries, higher borrowing costs come at a time of weakening demand for their exports, she said.
Georgieva added that while the global banking system had "come a long way" since the 2008 financial crisis, "concerns remain about vulnerabilities that may be hidden, not just at banks but also non-banks." She emphasized that "now is not the time for complacency."
In summary, the IMF chief warns that the world economy is expected to grow at less than 3% this year due to the ongoing COVID-19 pandemic and the military invasion of Ukraine by Russia. India and China are expected to account for half of global growth in 2023, but Georgieva warns that slower growth would be a severe blow, making it even harder for low-income nations to catch up. She emphasizes that now is not the time for complacency, and concerns remain about vulnerabilities in the global banking system.