- A decade of low growth and high debt is coming, IMF chief Kristalina Georgieva said in a Thursday speech.
- "Inflation is not fully defeated. Fiscal buffers have been depleted. And debt is up," she said.
- Medium-term global growth will reach just above 3% as productivity tumbles, the IMF estimates.
The world could soon sink into an era of depressed growth and spiraling debt, IMF managing director Kristalina Georgieva said in a speech delivered at an Atlantic Council event.
"Without a course correction, we are indeed heading for 'the Tepid Twenties' — a sluggish and disappointing decade," she said Thursday.
"Inflation is not fully defeated. Fiscal buffers have been depleted. And debt is up, posing a major challenge to public finances in many countries," she outlined.
The IMF now expects medium-term global growth to reach just above 3% — well below historical averages, Georgieva said. That's on account of stalling productivity across economies that's chipped into growth potential:
Although the US' post-pandemic economy has largely been a story of success, its rebound stands in stark contrast to a wide-spread slowdown, with low-income countries taking on most of this burden.
"The sobering reality is global economic activity is weak by historical standards. Prospects for growth have been slowing since the global financial crisis," she said.
To counteract this, Georgieva called for policies that will decisively slash inflation and debt, allowing governments to pursue productivity-boosting policies, such as those that ramp up the geen and digital transition.
While central banks are generally making headway with price stability, global debt has churned so high that some countries are at risk of falling into distress, Georgieva cautioned. Though higher debt is not a new trend, the return of high interest rates has made debt servicing a challenge across the world.
"In advanced economies, excluding the US, interest payments on public debt will average about 5 percent of government revenues this year," she said. "But the cost of servicing debt is most painful in low-income countries. Their interest payments are set to average about 14 percent of government revenue—roughly double the level from 15 years ago."
As some countries are already facing debt distress, Georgieva called for improved restructuring programs. For all countries, she advocated for fiscal prudence, recommending a closure of tax loopholes, and improved public spending.
This may be crucial, as the IMF forecasts deficits to remain too high to stabilize debt one-third of advanced and emerging economies.