Difficult But Doable: Managing Director Kristalina Georgieva's Remarks on Global Economic Challenges and the Role of APEC

IMF News, November 16, 2024

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Inflation is "retreating" in the US, in Europe, and "even more so in Asia."
This disinflation has occurred "without the economy slipping into recession."
IMF projection: growth "to reach 3.2 percent both this and next year."
APEC is "growing above the global average this year."
Despite falling inflation, "the higher prices people feel in their wallets are here to stay."

Medium-term global growth is "just around 3 percent."
Pre-pandemic decades growth was "3.8 percent," implying the pace is "slower than in the pre-pandemic decades by almost one percentage point."
Global public debt is "reaching 100 percent of GDP."
High interest rates raise debt service while low growth reduces revenues, "tightly constricting" government budgets relative to demands for education, infrastructure, and social services, especially in aging societies.

Trade is "no longer the powerful engine of growth it used to be" in a "more fractured world."
Drivers include national security concerns, political backlash from those who lost out, a "mushrooming of industrial policy measures, trade barriers, and protectionism."
Expected new trade restrictions: "over 3,000" worldwide this year.

Policymakers need to pursue two simultaneous goals:
- Fiscal consolidation to rebuild buffers for the next shock while preserving space for priority public investments, including massive needs of the green and digital transformations.
- Ambitious reforms to lift growth potential and energize job-creation, focusing on mobilizing private capital, improving productivity, and in some cases strengthening institutions and governance.
Fiscal consolidation requires difficult choices on how to raise revenues and make spending more efficient, and "ensuring that policy actions are well-explained to earn the trust of the people."
"Fiscal restraint is never popular" and is becoming harder as "even traditionally fiscally conservative political parties are developing a taste for borrow-to-spend."
Prudent fiscal rules are "paramount" to anchor government spending.
Reform momentum has slowed "since the global financial crisis" as discontent has grown, but "progress is possible."

Key successful elements: good policy design, good communication, and support for those who lose out from change.
Specific policy actions highlighted:
- Labor market reforms.
- Investment in human capital, R&D, and physical and digital infrastructure.
- Deepening capital markets and developing ecosystems that provide financing, knowledge, advice, and professional networks—"all very critical in the world of AI."

Support for APEC ambition to make the Asia-Pacific region "more sustainable, more digital, more resilient, and more APEC-focused."
Economic integration and multilateral action are "essential for raising growth and solving global problems."
The IMF stands ready as a partner to provide impartial economic analysis, tailored policy advice, and financial support to members hit by shocks.
Closing message: "Working together, as APEC shows, remains essential for preserving economic progress."

Remarks by IMF Managing Director Kristalina Georgieva at the APEC Leaders' Retreat in Lima, Peru — November 16, 2024