IMF Chief Kristalina Georgieva declares «uncertainty the new normal» for the global economy.
Ahead of the fund`s annual meeting next week, IMF Managing Director Kristalina Georgieva warned that «uncertainty is the new normal» for the world economy, highlighting escalating risks to economic stability.
The head of the International Monetary Fund issued a strong warning about the escalating risks facing the global economy, stating: “Brace yourselves: uncertainty is the new normal.”
As finance ministers and central bank governors prepare for the IMF`s annual meeting in Washington next week, Managing Director Kristalina Georgieva noted that the global economy has shown surprising resilience in the face of Donald Trump`s trade wars, as reported by The Guardian.
She stated that the U.S. is currently expected to avoid a recession, despite implementing historical tariffs against many of its trading partners, and the global economy is projected to slow “only marginally this year and next.”
However, Georgieva pointed to increasing signs of strain, including gold`s record price, which surpassed $4,000 an ounce on Wednesday—a reflection of investor anxiety—and unusually high valuations of U.S. equities.
“Before anyone breathes a sigh of relief, please hear this: global resilience has not yet been fully tested. And there are alarming signs that the test may be about to begin,” she told an audience at the Milken Institute in Washington.
Georgieva suggested that the full economic impact of U.S. tariffs “has not yet manifested,” as many companies earlier this year halted exports to avoid fees. “Brace yourselves: uncertainty is the new normal, and it`s here to stay,” she cautioned.
In its latest July update of the `World Economic Outlook,` the IMF projected global GDP growth of 3% this year – a slight slowdown from 3.3% in 2024. The IMF will update its forecasts at next week`s meetings.
While financial markets have generally remained calm in the face of political turmoil, the IMF chief stated that this “masks, but does not halt, some softening trends,” warning: “History tells us these sentiments can shift abruptly.”
In recent weeks, U.S. stock prices have surged to new highs, driven by the soaring valuations of the “Magnificent Seven” tech companies, including chipmaker Nvidia and Elon Musk`s electric vehicle manufacturer Tesla, The Guardian noted.
Optimism about future productivity gains from generative AI continues to bolster confidence on Wall Street, despite signs of slowing growth elsewhere, including in the U.S. labor market.
Drawing a parallel to the dot-com bubble at the turn of the millennium, Georgieva stated: “Today`s valuations are approaching levels we saw during the internet frenzy 25 years ago. Should a sharp correction occur, tightening financial conditions could slow global economic growth, expose vulnerabilities, and particularly complicate matters for developing nations.”
The IMF urges policymakers in major economies to take action to mitigate instability risks by addressing global imbalances, including calling on the U.S. to tackle its escalating public sector deficit.
Trump`s tax cuts, primarily benefiting higher-income individuals, are expected to increase the U.S. public debt by over $3 trillion over the next decade, even though the former U.S. president welcomed tariff revenues as a means to improve the country`s financial standing, The Guardian reported.
Georgieva also urged Beijing to implement reforms aimed at boosting economic growth and increasing household spending, stating that “private savings are chronically high” in China.
The Bulgarian economist also offered what she termed “tough love” to “my beloved native Europe,” urging the EU to appoint a “single market czar” to accelerate market integration.
“Enough with the grand rhetoric about boosting competitiveness – you know what needs to be done. It`s time to act,” she declared. “Remove border frictions in labor markets, in goods and services trade, in energy and finance. Create a unified European financial system. Build an energy union. Finish your project.”
She also drew attention to growing public discontent with the economic status quo in some countries, cautioning: “Many people in many places, especially the youth, are taking their frustrations to the streets: from Lima to Rabat, from Paris to Nairobi, and from Kathmandu to Jakarta, all demanding better opportunities.”
