IMF chief says effects of global slowdown 'more pronounced in India'

IMF Chief Kristalina Georgieva (Image: Reuters)

The global economy is in the midst of a “synchronised slowdown”, effects of which have particularly been felt in countries such as India, Kristalina Georgieva, the recently appointed chief of the International Monetary Fund said.

The IMF Managing Director said that global growth could fall to its lowest this decade as part of the slowdown, adding that the agency’s outlook, due next week, will cut growth estimates for both 2019 and 2020.

"In 2019, we expect slower growth in nearly 90 percent of the world. The global economy is now in a synchronized slowdown," Georgieva said on October 8 in a speech for the IMF and World Bank's annual meeting next week.

Despite this overall deceleration, close to 40 emerging market and developing economies are forecast to have real GDP growth rates above 5 per cent — including 19 in sub-Saharan Africa, she added.

In the United States and Germany, unemployment is at historic lows. Yet across advanced economies, including in the US, Japan and especially the euro area, there is a softening of economic activity, Georgieva said.

"In some of the largest emerging market economies, such as India and Brazil, the slowdown is even more pronounced this year. In China, growth is gradually coming down from the rapid pace it saw for many years," Georgieva said.

The precarious outlook presents challenges for countries already facing difficulties — including some of the Fund's programme countries, she noted.

Georgieva called for using monetary policy wisely and enhancing financial stability.

"Now is the time for countries with room in their budgets to deploy — or get ready to deploy — fiscal firepower. In fact, low interest rates may give some policymakers additional money to spend," she said.

The IMF chief referred to research that pointed to structural reforms and how they could raise productivity and lead to economic gains.

"The right reforms in the right sequence could double the speed at which emerging markets and developing economies reach the living standards of the advanced economies," Georgieva said.

While the need for international cooperation is going up, the will to engage is going down, she rued.

"Trade is a case in point. And yet, we need to work together. From safely adapting to fintech to fully implementing the financial regulatory reform agenda, to fighting money laundering and the financing of terrorism," Georgieva said.

Describing climate Change as a crisis where no one is immune and everyone has a responsibility to act, she said one of its priorities was to assist countries as they reduce carbon emissions and become more climate resilient.

At the current average carbon price of USD 2 per ton, most people and most companies have little financial incentive to make this transition. Limiting global warming to a safe level requires a significantly higher carbon price, she added.

- With PTI inputs