The International Monetary Fund (IMF) Managing Director warned on Thursday that the world economy could fall into a situation of slow growth and high debt levels due to escalating conflicts and geopolitical tensions. She also believes that without effective action to alleviate economic downturn by the Chinese government, there is a significant risk of a sharp decline in economic growth.
According to reports from the Associated Press, speaking at the autumn meetings of the International Monetary Fund and its sibling organization the World Bank on Thursday, IMF Managing Director Kristalina Georgieva told reporters, “This is an anxious time.”
The IMF predicts that global economic growth this year will remain at a level of 3.2%.
Conflicts and geopolitical tensions are currently intensifying, with the relationship between the world’s two largest economies, the United States and China, being one example. Georgieva stated, “Trade is no longer the strong engine of economic growth; we live in a more divided global economy.”
At the same time, many countries are struggling under the burden of debt incurred in response to the COVID-19 pandemic. The IMF projects that global government debt will exceed $100 trillion this year, equivalent to 93% of global economic output, and is expected to approach 100% by 2030.
“Global economy faces the danger of falling into a path of low growth and high debt,” Georgieva said, “This means lower incomes, fewer jobs.”
However, despite predicting challenging economic conditions, the IMF also stated that significant progress has been made globally in controlling inflation, with expectations that inflation rates in wealthy countries will fall to the targeted 2% set by central banks next year. Price pressures have eased, but the world has not been plunged into an economic recession. Georgieva said, “For most countries in the world, a soft landing is in sight.”
Nevertheless, many people are still struggling with high prices and economic uncertainty. Georgieva stated that world leaders have told her their countries’ economies are relatively healthy, but ordinary people “are not optimistic about their economic prospects.”
In its latest World Economic Outlook report released on Tuesday, the organization predicted that China’s economic growth rate is sliding from 5.2% in 2023 to just 4.8% this year, and is expected to grow by 4.5% in 2025.
Georgieva urged Beijing to shift from relying on exports to relying more on consumer spending.
She said, “If Beijing does not take action, the potential growth rate could slow down to below 4%.”