IMF chief says global economy doing "Better Than Feared, Worse Than Needed”

 The head of the International Monetary Fund (IMF), Managing Director Kristalina Georgieva, said the world economy has shown remarkable resilience despite facing multiple shocks, though growth is expected to slow only marginally over the next two years.

IMF chief says global economy doing "Better Than Feared, Worse Than Needed”

Speaking at an event hosted by the Milken Institute in Washington, Georgieva said recent data indicates a softening in the US economy, which has nonetheless avoided a recession many feared six months ago. “We see global growth slowing only slightly this year and next,” she said. “All signs point to a world economy that has generally withstood acute strains from multiple shocks.”

The IMF had raised its global growth projection in July to 3.0% for 2025 and 3.1% for 2026, but Georgieva told Reuters the upcoming World Economic Outlook, due next week, would include a “small downward revision” from the 3.2% forecast issued last October. “What we are seeing is demonstrable resilience in the world,” she said. “But it is a time of exceptional uncertainty and downside risks are still dominating the forecast. So watch it, don’t get too comfortable.”

Next week’s IMF and World Bank annual meetings will take place amid heightened global trade tensions following President Donald Trump’s tariffs and immigration restrictions, as well as rapid technological disruption from artificial intelligence (AI). Georgieva said the global economy was doing “better than feared, but worse than needed”, with medium-term growth projected at around 3%, below pre-pandemic levels of 3.7%.

She warned that deep-seated inequality and discontent persist globally, while financial markets face mounting risks. “Uncertainty is the new normal and it is here to stay,” she said, citing record demand for gold as investors seek safe havens. Gold prices hit an all-time high above US$4,000 an ounce on Wednesday, supported by expectations of a US Federal Reserve rate cut and continued political gridlock in Washington.

Georgieva noted that the US tariff shock was less severe than initially feared, with average trade-weighted tariffs easing to 17.5% from 23% in April. However, she cautioned that inflation could rise if companies begin passing on costs to consumers, or if new trade disputes erupt elsewhere. She also compared current market valuations to levels last seen during the dot-com boom, warning that a sudden correction could drag global growth, especially in developing economies.

Turning to policy priorities, Georgieva urged countries to “buckle up” and focus on fiscal consolidation, private-sector productivity, and reducing debt. She warned that global public debt is on track to exceed 100% of GDP by 2029 and called for coordinated efforts to strengthen buffers against future crises.

In regional terms, she said Asia should deepen trade and reform its service sectors, which could lift GDP by 1.8% in the long run, while Sub-Saharan Africa could see a 10% rise in real per capita income with business-friendly reforms. Europe, she added, must complete its single market to match the US’s private-sector dynamism.

She also offered “tough love” advice to major economies: the US should take sustained action to cut federal debt and boost household savings, while China should channel spending towards social safety nets and property clean-up instead of industrial subsidies that account for 4.4% of GDP.