Global economies face a period of lacklustre growth and pressure from rising debt piles, the head of the International Monetary Fund (IMF) has warned.
In an assessment that may chime with Chancellor Rachel Reeves as she ponders her first budget, managing director Kristalina Georgieva warned that growth will not deliver the tax revenues required to service debt and fund investment in the energy transition.
“Inflation rates may be falling but the higher price level that we feel in our wallets is here to stay,” she said.
“Families are hurting, people are angry. Advanced economies saw inflation rates at once-in-a-generation highs.
“Medium-term growth is forecast to be lacklustre. Not sharply lower than pre-pandemic, but far from good enough.
“Not enough to eradicate world poverty. Nor to create the number of jobs we require. Nor to generate the tax revenues that governments need to service heavy debt loads while attending to vast investment needs, including the green transition.”
Ms Georgieva was speaking ahead of the IMF annual meeting in Washington DC next week, which Ms Reeves will attend as she works to finalise budget measures expected to combine tax rises, departmental cuts and changes to borrowing rules to allow her to kick-start infrastructure investment.
Downing Street confirmed on Thursday that budget measures have been sent to the Office for Budget Responsibility, which will respond with a forecast assessing the impact on Tuesday.
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Two further forecasts are scheduled to respond to any adjustments – one on 25 October, and the final draft published alongside the budget on 30 October.
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Ms Georgieva also warned that trade disputes risked further dampening growth, in comments that will be seen as a veiled reference to tensions between the US and China.
“Major players, driven by national security concerns, are increasingly resorting to industrial policy and protectionism, creating one trade restriction after another,” she said.
“Going forward, trade will not be the same engine of growth as before. It is the fracturing I warned of back in 2019 – but worse. It is like pouring cold water on an already-lukewarm world economy.”