BEIJING (dpa-AFX) - Global economy is coping with shocks in a better-than-expected manner, but there is a risk that the resilience has not yet been fully tested, International Monetary Fund Managing Director Kristalina Georgieva said on Wednesday.
'How is the world economy coping? Short answer: better than feared, but worse than we need,' the IMF chief said in a curtain raiser speech for the 2025 IMF-World Bank Annual meeting next week.
Economies of the U.S. and many other advanced and emerging markets and some developing countries have thus far been resilient to acute shocks, Georgieva observed.
The lender expects global growth to slow only slightly this year and next.
'All signs point to a world economy that has generally withstood acute strains from multiple shocks,' Georgieva said.
She gave four reasons for this resilience that included improved policy fundamentals, private sector adaptability, less severe tariff outcomes than initially feared, and supportive financial conditions.
'The world has avoided a tit-for-tat slide into trade war-so far. But openness has nonetheless taken a big hit,' Georgieva noted.
She cautioned that the tariff crisis is not yet over as U.S. rates keep moving.
'The full effect is still to unfold. In the U.S., margin compression could give way to more price passthrough, raising inflation with implications for monetary policy and growth,' the IMF chief said. 'Elsewhere, a flood of goods previously destined for the U.S. market could trigger a second round of tariff hikes.'
Citing the recent surge in global demand for gold, Georgieva said this is among the worrying signs that the global economic resilience has not yet been fully tested, but the test may come.
The IMF expects global growth at roughly 3 percent over the medium term, which is down from 3.7 percent in the pre-pandemic era. Georgieva observed that global growth patterns are changing with China decelerating steadily, while India is developing into a key growth engine.
That said, the global debt picture is grim with the IMF projecting the global public debt to exceed 100 percent of GDP by 2029, led by advanced and emerging market economies.
The U.S. has high private consumption and fiscal deficit and so the government must address the federal government deficit and take steps to incentivize household savings, the IMF chief said.
China has chronically high private savings and weak domestic demand due to the prolonged real estate crisis and deflation, Georgieva said. The country needs a fiscal-structural package to boost private consumption, shift to new growth model and reflate the economy that will help to check the recent depreciation of its real exchange rate, she added.
In Europe, Germany needs to boost public spending on infrastructure, by improving incentives for private investment at home and this will underpin efforts to revive the private sector, Georgieva said.
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