Kristalina Georgievahas said that risks to financial stability have increased and called for greater vigilance over the global financial system
The Managing Director of the International Monetary Fund (IMF) – Kristalina Georgieva has said that risks to financial stability have increased and called for greater vigilance over the global financial system.
Her remarks came during a speech at the China Development Forum in Beijing where she also pointed to “green shoots” emerging in the world’s second-largest economy.
Georgieva lauded how policymakers had acted swiftly in response to the banking crisis, citing the recent collaboration by major central banks to boost the flow of United States (U.S.) dollars around the world.
Speaking on the occasion, she said, “These actions have eased market stress to some extent. But uncertainty is high, which underscores the need for vigilance.”
Global investors have been on high alert about the health of the banking sector following the sudden downfalls of Credit Suisse, Silicon Valley Bank and the U.S. based Signature Bank. Last week, there were concerns about Deutsche Bank and speculation over one of its bond payments weight on markets, prompting the European Union (E.U.) leaders to reassure the public over the resilience of Europe’s banking system.
Georgieva said that the IMF is watching the situation and is assessing the potential implications for the global economic outlook. She reiterated an IMF projection that the world economy will see growth slow to just under 3% this year, due to continued fallout from the pandemic, the war in Ukraine and tighter monetary policies. That’s compared to the historic average of 3.8% and down from 3.2% in 2022.
Pointing to the emergence of “green shoots” in China, where the IMF expects the recently reopened economy to expand by 5.2% this year. She said it is roughly in line with China’s official target of 5%. The growth would mark a historic low. But it would still be a significant improvement on the 3% logged by China last year.
China’s rebound this year will allow it to contribute roughly 1/3rd of global growth. Any 1% increase in Chinese Gross Domestic Product (GDP) growth would also help lift other Asian economies’ growth by an average of 0.3%.
She urged the Chinese policymakers to take steps to shift its economy and rebalance it toward more consumption-driven growth. This would make China more durable and less reliant on debt and will also help address climate challenges. To get there, the social protection system will need to play a central role through higher health and unemployment insurance benefits to cushion households against shocks.
Georgieva also called for reforms to help level the playing field between the private sector and state-owned enterprises, together with investments in education.
