We Can Do Better

IMF News, October 17, 2024

Source details

Curtain Raiser speech by IMF Managing Director Kristalina Georgieva at the 2024 IMF and World Bank Group Annual Meetings.
Date: October 17, 2024.
Purpose: preview the conversation among finance ministers and central bank governors on the outlook for the global economy and policy priorities.

The big global inflation wave is in retreat due to:
- resolute monetary policy action,
- easing supply chain constraints,
- moderating food and energy prices.
This disinflation has occurred without tipping the global economy into recession and large-scale job losses; labor markets in the US and euro area are “cooling in an orderly manner.”
Sources of resilience identified:
- central bank independence in advanced economies and many emerging markets,
- years of prudential reforms in banking,
- progress in building fiscal institutions,
- capacity development worldwide.

Persistent effects of recent inflation:
- “The higher price level that we feel in our wallets is here to stay.”
- Inflation “always hits the poor the hardest.”
Geopolitical risks:
- expanding conflict in the Middle East with potential to destabilize regional economies and global oil and gas markets;
- prolonged wars in Ukraine and elsewhere with serious humanitarian impact.
Macro outlook:
- Forecasts point to an “unforgiving combination of low growth and high debt.”
- Medium-term growth is “lackluster—not sharply lower than pre-pandemic, but far from good enough.”
- Consequences: insufficient growth to eradicate world poverty, create required jobs, or generate tax revenues to service heavy debt loads while funding investment needs including the green transition.
Debt and fiscal space:
- Public debt is “way higher than before the pandemic,” despite the brief fall in debt-to-GDP as inflation lifted nominal GDP.
- In a “severe but plausible adverse scenario, debt could climb some 20 percentage points of GDP above our baseline.”
- Interest-to-revenue ratio has evolved frighteningly, shrinking fiscal space—this effect is disproportionately worse in low-income countries.
Security and trade fragmentation:
- Rising defense expenditures and falling aid budgets threaten development finance.
- Increasing resort to industrial policy and protectionism is fracturing trade; trade will not be the same engine of growth as before.

Overarching message: “we can do better” — forecasts are not destiny.
Fiscal policy:
- Reduce debt and rebuild buffers for future shocks.
- Budgets need credible, gradual consolidation in most countries.
- Raise revenues and make spending more efficient while communicating policies to earn public trust.
- Note: political discourse increasingly favors fiscal expansion; fiscal restraint is getting harder.
Reforms to lift growth (three priority areas):

1. Make job markets work for people:

2. Mobilize capital:

Redirect abundant global capital to productive investments, not concentrated liquid assets in a few financial centers.
Eliminate barriers: weak investment environments, shallow capital markets.
Ensure financial sector oversight both ensures stability and encourages prudent risk-taking and value creation.

3. Enhance productivity:

Improve governance and institutions; cut red tape; harness AI.
Increase spending on education and R&D.
Foster venture capital ecosystems that provide financing, knowledge, advice, and networks.

Political economy and reform implementation:
- Pace of reforms has slowed since the global financial crisis as discontent has risen.
- IMF study: resistance to reforms often driven by beliefs and misperceptions and concerns about distributional effects.
- Reforms work best with two-way public dialogue and measures to mitigate impacts on those who lose out.

Call to work together despite mistrust and fragmentation:
- Preserve the rules-based global trading system that lowered prices, improved quality, and created jobs.
- Address climate change urgently:
- Create fiscal space for the green transition.
- Eliminate fossil-fuel subsidies.
- Mobilize capital to where it is most needed.
- Manage artificial intelligence:
- IMF research: AI, “if managed well, has the potential to lift world growth by up to 0.8 percentage points.”
- Urgent need for global regulatory and ethical codes because “AI is borderless.”
Appeal: lower the geopolitical temperature and attend to tasks that can only be tackled together.

In Managing Director Georgieva’s first term the IMF “provided one trillion dollars’ worth of liquidity.”
Recent Executive Board consensus actions:
- Reducing charges and surcharges on regular lending.
- Implementing a comprehensive package securing concessional lending capacity to support low-income countries.
Governance and representation updates:
- On November 1 the Board will welcome a third Director for Sub-Saharan Africa to ensure more voice for an underrepresented region.
- Combined with the “fifty percent quota increase agreed at our last Annual Meetings,” these actions strengthen the IMF’s ability to deliver value.
Membership:
- The Principality of Liechtenstein joins as the IMF’s 191st member.

Curtain Raiser Speech by IMF Managing Director Kristalina Georgieva, October 17, 2024.

CHAPTER 3 SLOWDOWN IN gLObaL MEDIUM-TERM gROWTH: WHaT WILL IT TaKE TO TURN THE TIDE?
- CHAPTER 3 SLOWDOWN IN gLObaL MEDIUM-TERM gROWTH: WHaT WILL IT TaKE TO TURN THE TIDE? (Markdown version)
- CHAPTER 3 SLOWDOWN IN gLObaL MEDIUM-TERM gROWTH: WHaT WILL IT TaKE TO TURN THE TIDE? (PDF)
CHAPTER 3 UNDERSTANDING THE SOCIAL ACCEPTABILITY OF STRUCTURAL REFORMS
- CHAPTER 3 UNDERSTANDING THE SOCIAL ACCEPTABILITY OF STRUCTURAL REFORMS (Markdown version)
- CHAPTER 3 UNDERSTANDING THE SOCIAL ACCEPTABILITY OF STRUCTURAL REFORMS (PDF)