IMF Chief Believes Risks To Financial Stability Have Risen, Calls For Continued Vigilance

International Monetary Fund chief Kristalina Georgieva reportedly said risks to financial stability have risen and asserted the need for continued vigilance. The IMF Managing Director pointed out that policymakers in advanced economies responded decisively to financial stability risks amidst bank collapses but vigilance was still needed.

Speaking at the China Development Forum, Georgieva reaffirmed her view that 2023 would be another challenging year, with global growth slowing to below 3% due to the impact of the pandemic, the war in Ukraine, and monetary tightening, according to a Reuters report.

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Despite a better outlook for 2024, global growth will remain well below its historic average of 3.8% and the overall outlook remained weak, Georgieva said. “So, we continue to monitor developments closely and are assessing potential implications for the global economic outlook and global financial stability,” she said.

The IMF was paying close attention to the most vulnerable countries, particularly low-income nations with high levels of debt, she said.

Georgieva also warned that geo-economic fragmentation could divide the world into rival economic blocs, ending in “a dangerous division that would leave everyone poorer and less secure.”

On China: The IMF Managing Director said China’s strong economic rebound, with estimated GDP growth of 5.2% this year, gave some hope for the world economy, with the country expected to account for around one-third of global growth in 2023.

The Fund estimates every 1 percentage point increase in China's GDP growth results in a 0.3 percentage point rise in growth in other Asian economies, she said.

She called for policymakers in China to focus on raising productivity and rebalancing the economy away from investment and towards more durable consumption-driven growth to level the playing field between the private sector and state-owned enterprises. Such reforms could boost real GDP by as much as 2.5% by 2027, and by around 18% by 2037, Georgieva said.

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