During the IMF and World Bank spring meetings in Washington, Managing Director Kristalina Georgieva of the International Monetary Fund expressed her concern over the sluggish pace of global economic growth. She highlighted the need for China to encourage greater consumer spending.
Georgieva addressed the media during a news conference, highlighting various factors that are impeding growth in China. These factors include aging populations, sub-optimal capital allocations, and the notable contrast in performance with the United States, which has exceeded expectations.
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Addressing the slowdown in productivity and growth
Georgieva stated that their present emphasis revolves around discovering effective approaches to address the slowdown in productivity and growth and to implement strategies aimed at reversing this trend.
The IMF recently projected global growth to be at 3.2 percent for 2024, which falls significantly below the 20-year pre-pandemic average of 3.8 percent. The lackluster performances in Europe and China, along with the impact of high interest rates and regional conflicts on developing economies, were cited as contributing factors. As a result, asset managers are preparing for potential delays in interest rate cuts as the U.S. Federal Reserve grapples with persistently high inflation.
Georgieva specifically addressed China’s situation, noting that the country is facing a property crisis caused by excessive investment, resulting in a decline in domestic demand. She described China as being at a critical juncture and urged a shift away from the longstanding growth model centered around investment and exports towards one driven by consumer spending.
Exploring domestic sources of growth in China
Additionally, Georgieva underscored the significance of exploring domestic sources of growth in relation to China. She highlighted that resolving the property sector crisis is seen as the initial step, as it would have the effect of instilling confidence in consumers and promoting greater spending. Furthermore, she suggested the expansion of the social safety net, which would offer Chinese citizens the opportunity to reduce their savings and increase their expenditures.
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