The IMF has significantly downgraded its global growth forecasts following major trade policy changes, and the global economy is currently facing “major tests” by the IMF managing director.
Kristalina Georgieva said she spoke to the press at an IMF/World Bank spring meeting in Washington, DC.
In its global economy outlook earlier this week, the IMF predicted global growth would fall to 2.8% in 2025 and 3% in 2026, with the announcement of a series of new US tariff measures and measures by trading partners.
The difficult background has created urgency for actions that spoke to the press and demanded strengthening the economy in a world of rapid change.
Three recommendations
Georgieva said the IMF documented what it called three comprehensive priorities that Member States should address in its global policy agenda document.
First, uncertainty weakens the growth outlook, and should work constructively to resolve trade tensions as quickly as possible, in order to provide certainty.
She urged the US to reduce its fiscal deficit, advising countries like China to “boosize private consumption and embrace the transition to services.”
She suggested that the eurozone should speed up work in the single market, calling on other countries to “lower trade barriers – both tariffs and non-tariffs.”
“The conjunction of current uncertainty will be premium on protecting macroeconomic and financial stability.
A sudden change in trade flows, a sudden re-Ricón of financial assets, or an unregulated exchange rate adjustment can undermine macroeconomic and financial stability.
“Another financial crisis will be devastating for the world, its people, and their livelihoods. Growth could stall over the years as debt escalates.
Her second priority emphasized the country's “need to protect its economic and financial stability.”
She said that doing this requires things to get right in the field of fiscal policy by restructuring buffers that help absorb the shock.
Speaking about the role of central banks in achieving this, she noted that apart from working to support growth and contain inflation, central banks must maintain their independence, which they say is important to reliability.
“Central banks need to achieve low and stable inflation and preserve their independence. Supervisory bodies need to protect the stability of the financial sector by maintaining robust regulations and supervision and strengthening monitoring of non-bank vulnerabilities,” the document states.
She explained her third priority to double growth-oriented reforms to increase productivity.
She called on the country to put entrepreneurship at the forefront, reform the labour market, create conditions for innovation, and launch long and necessary reforms that take advantage of technological advances.
“Domestic reform is urgently needed to enable private sector-led economic transformation, especially as trade can become a more unreliable source of growth. Policymakers need to improve the business environment, streamline excessive regulation, promote the adoption of innovation and technology to combat corruption and promote productivity,” the fund said.
