Global inflation continues to slow down; the strict monetary policy has had its effect without undermining the world economy, stated Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF).
She also emphasized that "it is too early to celebrate," as although inflation is decreasing, prices are consolidating at new, higher levels.
According to the IMF forecast presented by Georgieva, global inflation is expected to decrease from 5.7% in the fourth quarter of last year to 5.3% in the current quarter and further down to 3.5% in the fourth quarter of next year. Meanwhile, in developed economies, the slowdown in consumer price growth will occur at a faster rate.
"Now the world is moving towards a trajectory of low growth rates and high levels of debt," Georgieva stated during her speech on Friday at the annual meetings of the IMF and World Bank in Washington. "We predict that over the next five years, global GDP will grow at a sluggish pace, averaging 3.2% per year."
Additionally, the global government debt ratio is expected to continue rising, according to the IMF. Experts from the organization see a risk that global government debt may exceed the IMF's baseline forecast by an amount equivalent to 20% of global GDP, describing such a scenario as "harsh but plausible."
"Rising interest payments are consuming an increasingly large share of budget revenues, especially in low-income countries and emerging markets. All this is against the backdrop of accumulating spending needs," Georgieva stated.
Among the priority areas for spending are those related to climate and demographics, as well as investments aimed at addressing economic development gaps in emerging markets and low-income countries, she noted.
According to Georgieva, global trade is no longer the powerful engine of economic growth that it once was.
"The shift away from global economic integration, driven by both national security concerns and the dissatisfaction of those who have lost out because of it, is manifesting itself in a rampant spread of industrial policy measures, trade barriers, and protectionism," said the IMF head.
She urged IMF member countries to focus on rebuilding budget reserves, investing in growth-promoting reforms, and addressing global issues. Furthermore, in the context of easing monetary policy, countries need to start budget consolidation now, Georgieva asserted.