Economic Buzz: Risks to global growth outlook remain high; Central banks need to focus on their price stability mandate, says IMF chief

IMF chief Kristalina Georgieva at the conclusion of the G20 Finance Ministers and central bank governors meeting noted that the risks to global growth outlook remain high. Firstly, she mentioned that the energy shock is not over. The Strait of Hormuz remains largely closed, strategic oil and gas reserves will need restocking, AI drives up energy demand, and in the northern hemisphere winter is coming. Secondly, public debt?at almost 100 percent of GDP worldwide?now exceeds its post-World War II highs and is set to climb further. Looking back, the debt trajectory resembles a staircase: big vertical steps when shocks occur, little or no reduction afterward. Thirdly she noted that the disinflation process has stalled in many countries. Mounting fiscal pressures are pushing core bond yields upward and the interplay between fiscal and monetary policy worries markets. Last, but not least, the future impact of AI on productivity and financial stability is dogged by unknowns, she said. The IMF chief has asked central banks to focus on their price stability mandate. Fiscal authorities must hammer out credible medium-term consolidation plans. Structural policies should concentrate on cutting red tape and removing self-inflicted barriers to growth?because stronger potential growth would help address the fiscal problem, and addressing the fiscal problem would help lift growth prospects.

Powered by Commodity Insights