‘High interest’ warning from IMF! – Last Minute Economy News

Georgieva gave a speech titled “2020s: Turbulent, Lukewarm or Transformational? Policy Preferences for a Weak Global Economy” at the event she attended before the IMF-World Bank Spring Meetings.

In her speech, Georgieva emphasized that good policy choices are needed in a world where shocks occur more frequently and uncertainty increases, and pointed out that making the right policy choices will determine the future of the world economy.

Georgieva stated that in the World Economic Outlook Report to be published next week, global growth will be seen to be marginally stronger due to strong activities in the USA and many emerging market economies.

Underlining that the predicted global recession and stagflation period has been avoided, Georgieva noted that there are still many issues to worry about, the global environment has become more challenging and geopolitical tensions increase the risk of disintegration of the world economy.

Georgieva pointed out that growth expectations have slowed down since the global financial crisis and inflation has not been fully defeated, and explained that fiscal buffers have been exhausted and the increase in debts poses a great challenge to public finances in many countries.

Stating that the traces of the epidemic still continue, Georgieva reported that the global production loss since 2020 is approximately 3.3 trillion dollars.

Georgieva pointed out that among developed economies, the USA experienced the strongest recovery, with the help of increasing productivity growth, and stated that, on the other hand, activities in the Eurozone recovered much more gradually, reflecting the persistent effects of high energy prices and weak productivity growth.

Noting that the medium-term outlook for global growth is well below the historical average, slightly above 3 percent, Georgieva said, “If there is no correction in the course, we are heading towards a truly stagnant and disappointing decade, the ‘warm twenties’.” At this point, policymakers face a choice. “What we need is ‘transformational twenties’,” he said.

“WE EXPECT INFLATION TO CONTINUE TO FALL THIS YEAR”

Kristalina Georgieva, however, emphasized that price stability should be restored first and reminded that inflation reached its peak in mid-2022.

Reminding that headline inflation in developed economies decreased to 2.3 percent in the last quarter of 2023, from 9.5 percent 18 months ago, Georgieva said, “We expect this trend to continue in 2024 and major developed economy central banks to start reducing interest rates in the second half of the year.” We expect it to create the necessary conditions for said.

Georgieva pointed out that some central banks, mostly in developing countries, have started to relax, but said that especially developed countries are still waiting.

Stating that central banks will carefully adjust their decisions according to incoming data, Georgieva stated that policy makers should resist calls for early interest rate cuts when necessary, and that early easing could cause new inflation surprises that may require further monetary tightening.

Georgieva explained that delaying the interest rate cut for too long could negatively affect economic activity.

“EMPHASIS ON GLOBAL COOPERATION”

Georgieva emphasized the importance of rebuilding fiscal buffers to achieve sustainable debt levels and cope with future shocks, reporting that fiscal buffers have been exhausted and debt levels are very high in most countries.

Pointing out that much higher interest rates increase the cost of repaying debts, Georgieva said that restructuring is necessary for countries in debt distress.

Stating that policies that will revitalize growth are also important, Georgieva said, “Even more can be achieved with policies that will encourage economic transformation and accelerate the green and digital transition. How well we address these will determine the legacy of this decade.” he said.

Explaining the need for cooperation on policies that are important for the world, Georgieva noted that they advocate more trade and cross-border investment flows to increase efficiency and find solutions to global challenges.

Georgieva emphasized that it is more important than ever to bring countries together to overcome challenges and pursue opportunities, and reminded that when the world was shaken by the epidemic and the cost of living crisis, the IMF took decisive action with its members to provide financial and political support.

“CONTINUING HIGH INTEREST RATES MAY BE WORRYING”

Stating that the US economy is successful because it is more innovative and provides space for entrepreneurship and the labor market is in good condition, Georgieva noted that the “Inflation Reduction Act” in the country also accelerated the economy.

Georgieva argued that US growth is helping the global economy, but that higher interest rates in the US are not “great” news for the rest of the world.

Emphasizing that high interest rates make the USA more attractive, Georgieva said, “So financial flows come here. This puts the rest of the world in a bit of a difficult situation. High interest rates mean that the dollar is also strong. This means that other countries are weaker. If long “If the period continues, it could become a bit worrying in terms of financial stability for all these reasons.” made his assessment.

Georgieva stated that inflation in the USA has decreased, but that it is currently a cause for concern, but that the US Federal Reserve (Fed) is being cautious.