The world economy has offered signs of resiliencealthough the medium-term growth outlook “remains weak”, according to the managing director of the International Monetary Fund (IMF), Kristalina Georgievafor whom it turns out taming inflation priorityfor which it has asked the central banks to maintain the course of monetary policy, while fiscal policy must initiate a consolidation that allows economic shock absorbers to be rebuilt.
In a speech delivered in the Indian town of gandhinagar in the context of the meeting of finance ministers and central bank governors of the G20the Bulgarian economist has highlighted that the global economy has shown “a certain resilience”, despite the successive shocks of recent years and the rapid increase in interest rates.
Thus, global growth, “albeit anemic by historical standards,” remains firmly in positive territory, supported by strong labor markets and strong demand for services. That being said, the managing director of the IMF has warned that activity is slowing downespecially in the manufacturing sector, adding that, looking ahead, growth prospects over the medium term remain weak.
Core inflation is stagnant
Regarding inflation, georgieva has recognized some encouraging news, since “finally the trend is downward”, but has stressed that the overall rate is still too highwhile core inflation remains stagnant despite significant monetary policy tightening.
“We are seeing a mixed picture and the risks continue to be on the downside,” he summarized. georgievafor whom inflation could remain high for longer, which would require further tightening of monetary policywith the risk that fragmentation could further weigh on growth.
Thus, he has pointed out that “the main priority” is to reduce inflation in a lasting wayadding that, despite the progress achieved, the work is not yet finished and monetary policy should stay the course. “A premature celebration can reverse the gains made so far in the disinflation process,” warned the director of the IMF.
In addition, the economist has stated that “it is time to rebuild fiscal buffers” after an exceptional period of accommodative policies, adding that the IMF would like to see fiscal policy seek consolidation to improve debt sustainability and support disinflation, while ensuring adequate protection for the most vulnerable. On the other hand, he has reiterated the need to undertake reforms in the economies that promote growth to boost productivity and raise living standards.
