The head of the International Monetary Fund warned on Thursday that high debt and low growth remain major obstacles to the global economy.
International Monetary Fund Managing Director Kristalina Georgieva told CNBC that while the global economic recovery has made significant progress, governments have become too accustomed to borrowing and “weak growth” has exacerbated debt repayments challenges.
“Now is not the time to celebrate,” she told Karen Zoe. “When we look at the challenges before us, the biggest challenge is low growth, high debt. That’s where we can and must do better,” she added.
While Georgieva praised the work of major central banks in curbing inflation, she noted that these achievements were not universal and that some economies continued to struggle with rising prices, fueling social and political discontent. .
“The successful major economies are doing very well … there are some parts of the world where inflation is still a problem,” she said.
“The impact of rising prices is still felt and it’s leaving many people in many countries feeling worse and angry.”
The comments come as finance ministers and central bank governors are scheduled to hold the 2024 annual meetings of the International Monetary Fund and the World Bank Group in Washington, D.C. next week. They will discuss topics such as the world economic outlook, poverty eradication and the green energy transition.
Georgieva warned that international trade would no longer be the “engine of growth” it once was, highlighting the proliferation of restrictive policies in many economies.
The United States and the European Union have moved to impose a series of punitive tariffs on China over what they see as unfair trade practices by Beijing.
“What we’re seeing in the U.S. and elsewhere is pressure from people who understandably think globalization isn’t working for them; their jobs are disappearing, their communities aren’t being looked at, and concerns about safety — largely based on the impact of the pandemic, and Russia’s influence on Ukraine — they put national security priorities on the list,” she said.
“All of this has really created an environment of more distrust, where developed economies are now leading the way in terms of industrialist measures and protectionist measures compared to emerging markets.”
The head of the International Monetary Fund has previously warned against such restrictions, telling CNBC in June that the growing “enthusiasm” for restrictive measures such as tariffs was harming international development.
On Thursday, she reiterated that message, insisting that “retaliatory” trade measures could harm both those who implement them and those who target them.
“Our advice is to think carefully about the costs and benefits and what that might mean in the medium term. We will, of course, do our part by calculating the costs and benefits and showing who bears those costs and benefits as tariffs Usually by businesses and consumers in the countries that introduced them,” she said.
Earlier on Thursday, Georgieva also pointed to broader geopolitical tensions as one of the main risks to global financial stability.
“We are all deeply concerned about the expanding conflict in the Middle East and its potential to destabilize regional economies and global oil and gas markets,” she said in her opening remarks.
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