Kristalina Georgieva, Managing Director of the International Monetary Fund, warned during the G20 summit in Brazil that the outlook for the global economy is bleaker than at any time in recent decades.
The International Monetary Fund has forecast a modest global growth rate of 3.3% by 2025, reflecting ongoing challenges that threaten to undermine economic stability and exacerbate inequality.
Georgieva’s remarks point to a sobering reality: the global economy remains stuck in a slowdown, which could hamper efforts to combat poverty and inequality.
This slowdown poses a major threat to Kenya, which is struggling with its own economic challenges. The country’s GDP growth is expected to slow to 5% in 2024, down from 5.3% in 2023, before recovering to 5.3% in 2025.
With growth forecasts falling below pre-pandemic averages, the head of the International Monetary Fund has warned that the world is experiencing an unprecedented economic slowdown that could worsen income inequality.
The International Monetary Fund’s latest World Economic Outlook paints a bleak picture. Global growth is expected to hover around 3.2% this year, rising slightly to 3.3% in 2025, well below the 3.8% average recorded since the turn of the century until the pandemic struck.
President William Ruto during a meeting with International Monetary Fund (IMF) officials and Kenya’s National Treasury officials at State House in Nairobi on November 13, 2023.
Personal Computers
Georgieva noted that this recession is much more damaging than previous recessions, as prolonged periods of economic stagnation can push income inequality up by about 20 percent.
“Recessions are not just a temporary setback,” Georgieva added. “They lead to higher structural unemployment and lower wage growth, which in turn exacerbates the income gap between the rich and the poor.”
IMF analysis reveals that slow job creation and stagnant wages during economic downturns widen the income gap significantly.
This growing inequality could reverse decades of progress and fuel resentment toward economic integration and technological progress, which were previously engines of growth and development.
In response, Georgieva called for targeted policy measures to reverse this trend. She stressed the need for reforms to spur medium-term growth, including strengthening competition, improving access to finance, and expanding the workforce. “Fiscal policies should be designed to support the most vulnerable members of society and ensure that economic gains are more evenly distributed,” she said.
Furthermore, Georgieva highlighted the critical importance of a strong global financial safety net to help countries facing economic difficulties. She said this safety net is essential to protect countries from economic shocks and support sustainable development.
Georgieva noted that a gradual, people-centered fiscal approach could mitigate financial risks while supporting growth and reducing inequality. Tax reforms, including more effective taxes on capital income and property, could provide additional revenues without burdening the most vulnerable.
Georgieva also stressed the need to improve governance to restore public trust in tax systems. “People must have confidence that their taxes will fund essential public services rather than enriching those in power,” she said. Strengthening transparency and anti-corruption measures are vital to ensure tax revenues are used effectively, she added.
President William Ruto leads the Kenya Kwanza delegation during a meeting with International Monetary Fund Managing Director Kristalina Georgieva, Tuesday, November 8, 2022.
Personal Computers