IMF's Georgieva Cautions on Financial Stability, Urges Global Vigilance Amid Banking Crises

IMF Chief Kristalina Georgieva has cautioned that risks to global financial stability have increased, despite the advanced economies' efforts to alleviate market pressure. Speaking at the China Development Forum, Georgieva reiterated that 2023 will be a challenging year, with global growth slowing to below 3% due to the ongoing pandemic, the Ukraine conflict, and monetary tightening. Even with a more optimistic forecast for 2024, she expects global growth to remain below its historical average of 3.8%.

Georgieva highlighted the decisive response of policymakers in advanced economies to the risks posed by recent bank collapses, but emphasized the need for continued vigilance. She underscored the importance of closely monitoring developments and assessing their potential impact on global financial stability, particularly in vulnerable countries with high levels of debt and low incomes.

The IMF Chief also warned that geo-economic fragmentation could lead to competing economic blocs and a dangerous division, leaving everyone poorer and less secure. She praised China's strong economic recovery, with a projected GDP growth of 5.2% in 2023, and emphasized the country's role in driving global growth.

Georgieva urged Chinese policymakers to focus on increasing productivity and rebalancing the economy through market reforms and a shift towards consumption-driven growth. She estimated that such reforms could raise China's real GDP by 2.5% by 2027 and about 18% by 2037. Furthermore, she suggested that rebalancing China's economy would help it achieve its climate goals by reducing energy demand, lowering emissions, and easing pressures on energy security. This, in turn, could result in a 4.5% decrease in global emissions over the next 30 years.