(Bloomberg) -- The International Monetary Fund warned that wars, trade tensions, high debt and low growth threaten to prolong a lackluster economic era and leave nations without the resources to reduce poverty and confront climate change.
Higher consumer prices globally, conflict in the Middle East and Europe, and “far from good enough” medium-term growth prospects are reasons to be cautious despite an expected economic soft-landing, Managing Director Kristalina Georgieva said in a speech prepared for delivery Thursday in Washington.
At the same time, national security concerns are driving some of the world’s major players to pursue domestically focused industrial and protectionist policies, she said, in an implicit criticism of the US-China geopolitical rivalry.
The ratcheting up of trade barriers “is like pouring cold water on an already-lukewarm world economy,” Georgieva said. The clashes come “at a time when our forecasts point to an unforgiving combination of low growth and high debt — a difficult future,” she said.
The fund warned this week that global public debt is set to reach $100 trillion, or 93% of global gross domestic product, by the end of this year, driven by the US and China.
The IMF also sees economic growth being less than what’s needed for countries to create jobs, service significant debt loads and address huge investment needs, including the transition to clean energy.
Georgieva spoke as finance ministers and central bank leaders from almost 200 nations prepare to converge on Washington next week for the lender’s annual meetings, along with its sister institution, the World Bank.
The meetings take place less than two weeks before a pivotal US presidential election between Vice President Kamala Harris and former President Donald Trump. American voters rank the economy as their top concern — in particular the higher prices from inflation reaching the fastest pace in decades before being tamed by the Federal Reserve.
Despite praising the Fed’s action on inflation, the IMF has been unusually critical in recent months of the US, its largest shareholder. In June, it warned the Biden administration of deficits that are too big, the impact of too much debt, and dangers from increasingly aggressive trade policies.
The IMF will release an update to its World Economic Outlook on Tuesday. It forecast in July 3.2% global growth this year and 3.3% next year.
Bloomberg Economics this week forecast global GDP to expand 3% this year and accelerate to 3.2% in 2025.
Despite the warnings, Georgieva noted that central banks have successfully wrangled inflation, supply-chain constraints have eased, and food and energy prices have moderated. Labor markets in both the US and European Union are cooling off in an orderly way as well, she said, calling all of that “a big achievement.”
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