Remarks by Managing Director Kristalina Georgieva at the 2023 China Development Forum

IMF News, March 26, 2023

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2023 expected to be another challenging year, with global growth slowing to below 3 percent.
Even with a better outlook for 2024, global growth will remain well below its historic average of 3.8 percent.
Uncertainties are exceptionally high, including risks of geo-economic fragmentation which could mean a world split into rival economic blocs — a “dangerous division” that would leave everyone poorer and less secure.
Medium-term outlook for the global economy is likely to remain weak given pandemic scarring, the war in Ukraine, and monetary tightening.

Risks to financial stability have increased amid higher debt levels and the rapid transition from a prolonged period of low interest rates to much higher rates—necessary to fight inflation.
Recent developments in the banking sector in some advanced economies evidence stresses and vulnerabilities.
Policymakers have acted decisively; advanced economy central banks have enhanced the provision of U.S. dollar liquidity, which has eased market stress to some extent.
The IMF is monitoring developments closely and assessing implications for the global economic outlook and global financial stability, with attention to the most vulnerable countries, particularly low-income countries with high levels of debt.
A detailed assessment will be provided in forthcoming World Economic Outlook and Global Financial Stability Report to be published in the coming weeks.

China is seeing a strong rebound; the IMF’s January forecast puts GDP growth at 5.2 percent this year — a sizeable increase of more than 2 percentage points from the 2022 rate.
The rebound is driven by the anticipated rebound of private consumption as the economy has reopened and activity has normalized.
China is set to account for around one third of global growth in 2023, providing a welcome lift to the world economy.
IMF analysis: a 1 percentage point increase in GDP growth in China leads to 0.3 percentage point increase in growth in other Asian economies, on average.

Objective: rebalance the economy away from investment and towards more consumption-driven growth that is more durable, less reliant on debt, and will also help address climate challenges.
Key policy actions recommended:
- Strengthen the social protection system through higher health and unemployment insurance benefits to cushion households against shocks.
- Implement market-oriented reforms to level the playing field between the private sector and state-owned enterprises.
- Invest in education to lift the economy’s productive capacity.
Projected impacts from IMF research:
- Productivity-enhancing reforms in China could lift real GDP by as much as 2.5 percent by 2027.
- Productivity-enhancing reforms could lift real GDP by around 18 percent by 2037.
- These gains would help offset demographic pressures and narrow the gap to advanced economy income levels.

China’s goal of net-zero emissions by 2060 is welcomed as important for long-term development.
Climate vulnerabilities:
- Extreme weather events are becoming more frequent and damaging; example: severe droughts last year reduced hydropower output and put pressure on the power sector.
- Temperatures in China are rising faster than the global average, increasing risks to economic growth.
- Unmitigated warming could lead to estimated GDP losses in China of between 0.5 and 2.3 percent as early as 2030.
Synergies between rebalancing and climate goals:
- Most of China’s carbon dioxide emissions are generated from power and industrial activities, so moving to consumption-led growth will cool energy demand and ease energy security pressures.
- IMF research shows such rebalancing could lead to a reduction in carbon dioxide emissions of 15 percent over the next three decades.
- That reduction in China translates into a fall in global emissions of 4.5 percent over the same period.
Co-benefits: lower emissions improve air quality, public health, and biodiversity.

The IMF’s role is to bring members together to address global challenges and foster solidarity.
China has contributed constructively, including through contributions to the Poverty Reduction and Growth Trust, financing for the Resilience and Sustainability Trust, and assistance in helping highly-indebted countries.
Continuing support for the world’s most vulnerable countries will be vital to avoid fragmentation and to solve global challenges through cooperation.

Source: Remarks by Managing Director Kristalina Georgieva at the 2023 China Development Forum, March 26, 2023, International Monetary Fund.