Global growth has shown "some resilience" in the face of successive shocks, but prospects aren't encouraging, Kristalina Georgieva, the managing director of the International Monetary Fund (IMF) has said.
"…activity is slowing, especially in the manufacturing sector," Georgieva said in a statement on July 18 at the third meeting of the G20 Finance Ministers and Central Bank Governors in Gandhinagar.
"Looking further ahead, medium-term growth prospects remain weak. Moreover, divergences in economic fortunes across countries are a persistent concern: some pockets of the global economy are doing well; others are weakening but still growing; and vulnerable countries are falling further behind," she added.
Meanwhile, Georgieva maintained that India is a "bright spot" in the global economy.
Despite concerns about future growth, the IMF's boss said bringing down inflation on a durable basis is the "top priority". While the decline seen in recent months was "encouraging", Georgieva said the "job is not yet done", echoing the views of central bankers from around the world, including Reserve Bank of India (RBI) Governor Shaktikanta Das.
As such, Georgieva cautioned against premature celebrations and advised that monetary policy must not loosen its grip too soon given that core inflation remains sticky despite the rapid and significant increase in interest rates.
"We are thus looking at a mixed picture, and risks remain on the downside. Inflation could remain higher for longer, requiring even more monetary policy tightening, and fragmentation could weigh even more on growth. To mitigate these risks, I call upon G20 leaders to seize the opportunity to move the global economy onto a more vibrant medium-term path," she said.
Alleviating debt issues
With the global growth picture mixed and poorer countries vulnerable to debt-related issues, Georgieva called on the G20 to bridge the shortfall in subsidy resources in its Poverty Reduction and Growth Trust, or PRGT, as the IMF's support for low-income nations had risen by four times in recent years and demand was "still high".
She also called on G20 nations to "restore the primacy of IMF quota resources by successfully completing the 16th quota review by the end of this year" as quota resources had shrunk in relative terms and are key to ensure predictability of the agency's "firepower".
A key item on the G20 agenda has been easing debt pressures on vulnerable nations, with China's reticence as a key global creditor proving to be a hurdle so far. However, indications are the Gandhinagar meeting saw the impasse being broken to some extent, with the G20 members coming to an understanding of sorts on the common set of principles that should be followed in restructuring of sovereign debt.
In her statement, Georgieva said "welcome progress" had been made on restoring debt sustainability, with the recent Zambia agreement a significant milestone for the G20 Common Framework. However, she rued the slow progress of the discussions.
"The costs of delays in reaching agreement on needed debt treatments are borne acutely by borrower countries and their people, who are least able to bear this burden. The GSDR (Global Sovereign Debt Roundtable) is the right forum to push for more progress, including clear timelines, debt service suspension during negotiations, and improved creditor coordination on debt treatment for countries outside the Common Framework," she argued.
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