The head of the agency has issued a warning that inflation may have a prolonged negative impact on economic growth; this could necessitate further tightening of monetary policy.

According to the chief of the International Monetary Fund (IMF), Kristalina Georgieva, global economic activity is slowing down, particularly in the manufacturing sector. She made this statement during Tuesday’s meeting with G20 finance ministers and central bank governors.

In her statement, she acknowledged that the global economy has demonstrated resilience despite facing multiple shocks in recent years and a rapid increase in interest rates.” Robust labour markets and high service demand support the economy’s growth. However, it still needs to be considered more substantial than historical standards.

There is a decrease in activity, particularly in the manufacturing sector. According to Georgieva, the growth prospects for the medium-term future could be looking better. She predicts advanced economies will experience a significant slowdown, with growth dropping from 2.7% in 2022 to 1.3% by the end of 2023.

Moving Markets

According to Georgieva, inflation is still a problem for economic growth, despite some signs of slowing down.

The latest update on inflation brings some positive news – the trend is now moving downward. According to the speaker, headline inflation is still too high, and core inflation is not decreasing, even with the recent tightening of monetary policy. She believes that inflation could stay elevated longer, and additional interest rate increases will be necessary. Additionally, she mentions that fragmentation could have a more significant negative impact on economic growth.

In her address to the G20 leaders, Georgieva emphasised the need to improve the global economy by implementing effective policies. These policies should reduce inflation and ensure responsible financial management. According to her, the efforts to address these issues may differ across countries and might need cooperation among nations. The IMF is particularly worried about the ongoing differences in economic conditions among countries.

The global economy is experiencing a mix of situations. While some areas are performing strongly, others are experiencing a slowdown but still showing growth. Unfortunately, some countries are struggling and falling even further behind, emphasising the importance of bolstering the global financial safety net to safeguard the most vulnerable countries and their populations.

Advanced and robust emerging market economies have over $10 trillion in international reserves, providing them with a financial buffer. However, other countries depend on shared resources from international institutions like the IMF.

Georgieva has called on global leaders to adopt reforms that support the growth of businesses and the creation of jobs.

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