The International Monetary Fund (IMF) has warned that the world economy is facing its weakest five years of growth in more than 30 years, according to IMF Managing Director Kristalina Georgieva. Georgieva has predicted that world gross domestic product (GDP) growth is expected to average just 3.0% over the next five years, which is the lowest since 1990 and well below the average of 3.8% seen over the last two decades. She warned that the twin threats of geopolitical instability and deglobalization would hinder growth in the years ahead. These comments come amid Russia's invasion of Ukraine and the escalating rivalry between the US and China.
Georgieva also highlighted the potent threat of the war, which could wipe out the peace dividend enjoyed over the last three decades and add to frictions in trade and finance. The IMF Managing Director expects growth to slow below 3% this year, in line with the IMF's existing forecasts, as interest rate increases take their toll. Additionally, she repeated the Fund's warnings that the world economy could split into aligned blocs, potentially breaking up supply chains and investment channels that have underpinned global living standards since the end of the Cold War. Georgieva has also urged global regulators to be "vigilant" and "agile" to prevent fresh threats to growth, acknowledging the remarkable swift and comprehensive actions of regulators in recent weeks.
The warnings come amid increasing geopolitical tensions and a rise in nationalism across the world, posing threats to global growth prospects. This has been further compounded by a slowdown in major economies like China, trade tensions between the US and China, Brexit, and low oil prices. It is crucial for governments worldwide to address these issues through coordinated policies that promote economic growth, financial stability, and mitigate geopolitical risks. Failure to address these concerns could lead to a global economic downturn with far-reaching consequences for businesses and individuals worldwide.
