WASHINGTON, Oct. 24 (Xinhua) -- The International Monetary Fund (IMF) warned on Thursday that the global economy is in danger of getting stuck on a low-growth high-debt path, urging policymakers to act on debt and carry out pro-growth reforms.
"The global economy is in danger of getting stuck on a low-growth high -debt path, that means lower incomes and fewer jobs. It also means lower government revenues, so less investment to support families and fight long-term challenges like climate change," IMF Managing Director Kristalina Georgieva said at a press conference during the ongoing 2024 IMF and World Bank Group Annual Meetings.
Firstly, Georgieva called on policymakers to ensure that inflation gets back to target everywhere, noting that the trick now for central banks is to "finish the job of inflation without unnecessarily damaging the job market."
Secondly, "now is the time to act on debt and deficits after years of much-needed fiscal support in response shots. Now is the time to rebuild fiscal buffers in most countries. That can be done gradually, but it needs to start now," she continued.
Third and most important, she said, it is crucial that countries carry out pro-growth reforms from cutting red tape to improving governance, noting that IMF analysis shows that these reforms can boost output by 8 percent over four years in developing countries.
In the latest World Economic Outlook (WEO) released Tuesday, the IMF maintained its global growth forecast in 2024 at 3.2 percent, consistent with its projection in July. Growth prospects for five years from now remain lackluster, at 3.1 percent, the lowest in decades.
Advanced economies are projected to grow by 1.8 percent this year, while emerging market and developing economies will grow 4.2 percent. The Chinese economy is on track to grow 4.8 percent, according to the projection.
In response to a question from Xinhua, Georgieva said at the press conference that the IMF will have to carefully assess the measures recently announced by Chinese authorities to be able to determine what exactly is the likely impact, while noting that "there are measures that go in the right direction."
The IMF chief noted that for quite some time, China has been faced with a fork in the road: continue with the export-led growth policies or boost domestic consumption, and shift the growth engine to the Chinese consumer. "We are on the view that as the Chinese economy has grown so big, it is the latter, domestic consumption that is the reliable source of growth," she said.
In the short term, one big obstacle to consumer confidence is in the property sector, and a decisive action to resolve that would help lift up consumer confidence, she said.
Looking ahead, "by having social security and pension reform that gives people confidence that they don't need to save excessively, they can rely on the system, that would mean that they spend more," she continued.
"Taking the sectors of the economy that are somewhat less developed from a consumer standpoint, like healthcare, education, elderly care, making services more of a driver for growth, that would help," she said, adding that "I'm sure the leadership in China is looking into these choices." ■
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