WashingtonThe International Monetary Fund is preparing to unveil its latest forecast for the global economy on January 17, with expectations of steady global growth and a gradual decline in inflation, according to IMF Managing Director Kristalina Georgieva.
Speaking on Friday, Georgieva highlighted that the US economy is performing “better than expected” but noted significant uncertainty surrounding trade policies under the incoming administration of President-elect Donald Trump. She noted that this unpredictability creates headwinds for the global economy and pushes long-term interest rates higher.
With US inflation approaching the Fed’s target and the labor market showing stability, Georgieva noted that the Fed could afford to postpone further interest rate cuts, stressing that overall interest rates are likely to remain high for an extended period.
The IMF’s updated forecasts, which are scheduled to be released a few days before Trump takes office, will provide a clearer picture of global economic trends. However, Georgieva did not share specific expectations.
In its October report, the IMF raised growth forecasts for the United States, Brazil and the United Kingdom while trimming forecasts for China, Japan and the eurozone, citing risks such as trade tensions, geopolitical conflicts, and tighter monetary policies. At that time, global growth forecasts for 2024 remained steady at 3.2%, while forecasts for 2025 were lowered slightly to 3.1%, reflecting concerns about medium-term growth trends falling below pre-pandemic levels.
“There is growing global interest in the political orientations of the incoming US administration, especially with regard to tariffs, taxes, deregulation, and government efficiency,” Georgieva said. “This uncertainty, especially regarding trade policies, poses challenges for globally integrated economies, medium-sized countries, and Asia as a region.”
Georgieva described an unusual economic scenario in which long-term interest rates rise despite declines in short-term interest rates, a trend unprecedented in modern history.
The IMF expects mixed regional growth trends: recession in the European Union, a slight slowdown in India, and rising inflation pressures in Brazil. China, the second largest economy in the world, faces deflationary challenges and weak domestic demand. At the same time, low-income countries remain vulnerable to economic shocks despite reform efforts.
It is worth noting that Georgieva noted that despite the rise in interest rates aimed at curbing inflation, the global economy has avoided recession. However, divergent inflation patterns require domestic monitoring by central banks.
Georgieva warned that a stronger US dollar could increase borrowing costs for emerging markets and low-income countries. She stressed the importance of fiscal discipline in the wake of significant increases in spending during the pandemic and called for structural reforms to ensure sustainable growth.
“Countries cannot borrow their way out of economic challenges; “They have to grow their way out,” she said, warning that medium-term global growth prospects are at their weakest levels in decades.