IMF chief says the world economy is expected to grow less than 3% this year

The International Monetary Fund chief said on Apr. 6 that the world economy is expected to grow less than 3% this year, down from 3.4% last year, increasing the risk of hunger and poverty globally.

Kristalina Georgieva said the period of slower economic activity will be prolonged, with the next five years of growth remaining around 3%, calling it “our lowest medium-term growth forecast since 1990, and well below the average of 3.8% from the past two decades.”

Georgieva said slower growth would be a “severe blow,” making it even harder for low-income nations to catch up. “Poverty and hunger could further increase, a dangerous trend that was started by the COVID crisis,” she said.

Georgieva’s comments at a Politico event at the Meridian International Center come ahead of next week’s spring meetings of the IMF and its sister lending agency, the World Bank, in Washington, where policymakers will convene to discuss the global economy’s most pressing issues.

The annual gathering will take place as central banks around the world continue to raise interest rates to tame persistent inflation and as an ongoing debt crisis in emerging economies pushes debt burdens higher, preventing nations from developing.

Roughly 15% of low-income countries are already in debt distress, and another 45% face high debt vulnerabilities, according to the IMF.

Georgieva said high interest rates, a series of bank failures in the U.S. and Europe, and deepening geopolitical divisions are threatening global financial stability.

“Asia especially is a bright spot,” she said, as India and China are expected to account for half of global growth in 2023.

Advanced economies face the challenge of high inflation, as 90% of them are projected to see a decline in their growth rate this year.

This all comes as the United States, the European Union and others are rethinking their trade relationships with China.

Tensions with China accelerated after Russia’s invasion of Ukraine in February 2022, with Chinese President Xi Jinping pledging a friendship without limits to Russian President Vladimir Putin.