The IMF's managing director warned this morning that its outlook for global economic growth over the next five years is the weakest in over 30 years.
Speaking in Washington ahead of the spring meetings next week, Kristalina Georgieva said the world economy would expand at an average annual rate of around 3 per cent over the next five years (the lowest medium-term growth forecast since 1990 and less than the five-year average of 3.8% from the past two decades).
About 90% of advanced economies will see growth slow this year as tighter monetary policy weighs on demand and slows economic activity in the US and euro area, the IMF said.
“With rising geopolitical tensions and still-high inflation, a robust recovery remains elusive,” Georgieva said in her prepared remarks.
“This harms the prospects of everyone, especially for the most vulnerable people and countries.”
Georgieva added that despite the bleak growth outlook, high inflation means that central banks must continue to raise interest rates, as long as financial stability pressures remain limited after recent banking industry upheaval in the US and Switzerland
The fund’s managing director said key impediments to growth were increasing economic fragmentation and geopolitical tensions.
“The path back to robust growth is rough and foggy, and the ropes that hold us together may be weaker now than they were just a few years ago,” Georgieva added.
Finally, stating the somewhat obvious, Georgieva warned that if banking system turmoil were to return, central banks would face “difficult trade-offs between their inflation and financial stability objectives, and the use of their respective tools.”
Well, they certainly have lots of 'tools'...