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

_IMF News, March 26, 2023_

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## Bibliographic details
- Published: March 26, 2023

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### Global outlook and risks
- 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.

### Financial stability concerns
- 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’s rebound and spillovers
- 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.

### Policy opportunity 1 — Raise productivity and rebalance growth
- 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.

### Policy opportunity 2 — Green growth
- 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.

### IMF role and international cooperation
- 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.*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
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