Global growth of around 3% is expected for the next five years, the lowest medium-term growth forecast since 1990 and well below the average of the last two decades, 3.8%.
“This will make it more difficult to reduce poverty, heal the economy from the wounds of the crisis and provide new and better opportunities for everyone,” Georgieva warned.
Almost all of the world’s major economies will see a decline in their growth rate. Only Asian powers such as China or India will be saved, which will account for half of world growth in 2023, said the director of the Fund.
The eurozone and the United States face “a steeper rise” as interest rates weigh on demand.
With the aim of cooling the economy and lowering inflation rates, the US Federal Reserve has carried out a series of interest rate hikes since March 2022. A total of nine increases to reach a range between 4.75% and 5%, the highest rate in the last 16 years.
The European Central Bank has raised rates six times since July 2022 and today they stand at 3.5%, the highest rate since 2008.
These increases, Georgieva pointed out, will have consequences for growth and will continue to occur until inflation falls considerably. It is necessary and recommended, said the managing director.
“As long as financial pressures remain limited, we expect central banks to stay the course in the fight against inflation, keeping a firm stance to prevent inflation expectations from slipping,” he said.
Next Tuesday the IMF will present its report and it will be seen if the last estimated growth figure for 2023, of 2.9%, announced in January, is modified.
The institution will also present two other documents this coming week: the Fiscal Monitor and the Global Financial Stability Report, in which it is expected to take stock of the banking health after the recent attempts at a banking crisis in the United States and Europe.
According to Georgieva, after this crisis – “expected” due to the rise in rates – it has been shown that “the banking sector has come a long way since the global financial crisis of 2008”.
“Banks today are generally stronger and more resilient, and the authorities have been remarkably swift and thorough in their actions in recent weeks,” Georgieva said, noting that, however, “concerns persist about vulnerabilities that may be hidden” and “now is not the time for complacency.
For a week, starting this Monday, managers of the World Bank and the Fund will meet with ministers and managers of financial institutions to discuss the state of the world economy and the main future challenges.
In Georgieva’s opinion, there are three priorities for action: to fight against inflation and to safeguard financial stability; improve growth prospects in the medium term by increasing productivity and fostering solidarity to reduce disparities.
The participants in these spring meetings will hold private meetings and public debate forums in which various topics such as public debt, women’s economic empowerment, public spending or digital investment and innovation will be discussed.
These will be the last meetings for the president of the World Bank, the American David Malpass, who announced last February that he would leave the post in June to seek new job opportunities.
