The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, said that in 2025 the global economy is projected to grow by 3.3% and the growth of the US economy will be higher than that of the EU.

Her statement came during the meeting of G20 finance ministers and central bank governors in Cape Town, South Africa:

"We forecast global growth of 3.3% this year and next - robust but well below the historical average and in the context of high levels of public debt. Underlying this are widening divergences between economies, with stronger growth in the US and a slightly more gradual strengthening in the EU than previously expected. In emerging markets and developing economies, growth in 2025 is broadly in line with last year's performance," Georgieva said.

"The global process of disinflation continues. With the gradual cooling of labour markets and expected further declines in energy prices, headline inflation is expected to continue moving towards central banks' targets," she added.

Georgieva noted that the economic policies of the new presidential administration in the US are creating high uncertainty, which is causing other governments to adjust their policies as well. 

"The risks also diverge. In the short term, there is some potential for growth in the US, where positive sentiment could spur activity. But risks are generally to the downside for most other economies, including the risk of policy-induced disruptions to the disinflation process or of capital flight from emerging market economies," the IMF director stressed.

She said growth prospects are at their lowest level in decades and this requires policies that "provide a sound basis for higher and more durable growth."

"Macroeconomic and financial stability must be preserved to enable growth. To this end, countries need to manage multiple factors: to limit short-term risks, rebuild buffers and improve medium-term growth prospects. Central banks continue to focus on fully restoring price stability and to do so while supporting activity and employment," Georgieva said.

She called on most countries "to bring public debt into a sustainable shape and to rebuild fiscal reserves." 

"It is crucial that countries undertake ambitious reforms to boost productivity and improve growth prospects. Specific priorities will vary from country to country, but in general this requires a focus on supply-side policies: cutting red tape, boosting competition and encouraging entrepreneurship, strengthening education systems, smart regulation that can encourage risk-taking, and the rapid but safe advance of productivity-enhancing technologies such as artificial intelligence," Georgieva said.

According to the managing director, while reforms are key, in many countries they are only possible with "external support".

"Strengthening external support is vital to help countries implement reforms through capacity development and concessional external support, as well as action to attract more private flows," she said. 

"There is also an urgent need to address debt challenges. Several countries may need to restructure their debt, while many others face high interest payments and refinancing needs that limit their ability to invest in their future. A key step is to improve the predictability and timeliness of restructuring processes, building on the significant progress that has already been made, including under the common framework. We also need to help countries with sustainable debt but facing high interest payment and refinancing needs that limit their ability to invest in education, health or infrastructure," Georgieva added. | BGNES