IMF Managing Director Kristalina Georgieva said the US $ 1.9 trillion support program and growing confidence due to increased immunizations in many advanced economies were the main reasons for the at forecast level.
The head of the International Monetary Fund, which has 190 countries, said the outlook for global growth has improved since January, aided by a US $ 1.9 trillion bailout. But she warns that uneven progress in tackling the coronavirus pandemic could jeopardize economic gains.
IMF Managing Director Kristalina Georgieva said on Tuesday that when the IMF releases its updated economic forecast next week, it will show that the global economy is growing at a faster rate than the 5.5% gain expected in the beginning of the year.
In an address hosted by the Council on Foreign Relations, she said the $ 1.9 trillion support package that U.S. President Joe Biden enacted on March 11 and the growing confidence due to increased vaccinations in many many advanced economies were the main reasons for the forecast upgrade.
Georgieva said governments around the world have taken extraordinary steps over the past year, including providing combined support of $ 16 trillion and a massive injection of liquidity into the financial sector by central banks around the world. Without this quick response, Georgieva said last year’s downturn would have been three times worse.
But she said the economic outlook “diverges dangerously” with the global economy now in a multi-speed recovery increasingly fueled by two engines – the United States and China, the world’s two largest economies, while that other countries are lagging behind.
Georgieva said the world faced “extremely high uncertainty”, which depended so much on the trajectory of the pandemic, with new strains of the virus now delaying growth prospects, especially in Europe and Latin America.
Private economists predict that the US economy could grow 6-7% this year, which would be the best performance since 1984. But Georgieva said strong growth in the US could trigger a rapid rise in interest. , which could trigger significant capital outflows. emerging and developing countries.
She said emerging and low-income countries already have limited firepower to tackle the crisis and are highly exposed to the decline in tourism and other sectors hit hard by the pandemic.
She said how best to tackle the pandemic would be the key agenda item when the IMF and its sister organization hold their spring virtual meetings next week. These discussions will also include a meeting of finance ministers from the Group of 20 major industrialized countries.
She said the IMF estimates that faster progress in ending the health crisis could add nearly $ 9 trillion to global gross domestic product by 2025.
“Given the divergent recoveries, it is prudent to closely monitor financial risk, including stretched asset valuations,” she said. “And major central banks must carefully communicate their action plans to avoid excessive financial volatility at home and abroad.”