The IMF predicts another year of slow, steady global economic growth

CGTN Europe spoke to Petya Koeva-Brooks, IMF Deputy Director of the Research Department

Transcript

00:00 Petia Quaver-Brooks is Deputy Director of Research at the International Monetary Fund.

00:06 The global economy has been surprisingly resilient and we have upgraded our forecast by 0.2 this

00:12 year. Growth is holding steady as you mentioned at 3.2 and inflation is expected again to

00:19 come down. So all of that is the good news but there are a lot of risks ahead and also

00:24 looking into the medium term we're expecting growth to be around 3.1 which is significantly

00:30 lower than the historical average of 3.8. So you mentioned risks ahead, the geopolitical

00:37 situation obviously one threats growth, what other challenges do you see? Absolutely, indeed

00:43 the escalation of geopolitical risks is one which could increase oil prices and lead to

00:49 higher shipping costs which would mean that the impact on inflation would be adverse and

00:56 it could delay the easing of monetary policy. But the other risks as well, we could see

01:02 inflation staying stickier than what we are currently expecting in some countries. There

01:07 could also be adverse outcomes in China. All of that said there are of course risks on

01:14 the upside as well which we highlight in our report. Let's talk about China. How important

01:20 is China's growth for the health of the global economy? Well China is the second largest

01:26 economy and even though it is slowing we're expecting growth this year to be 4.6. These

01:34 growth rates are still significantly higher than those in advanced economies. So it will

01:39 still remain an important source of growth for the global economy. That said we just

01:45 overnight saw some numbers for the first quarter which surprised on the upside so we could

01:50 be revisiting our forecast. Well let's talk about the world's biggest economy then, the

01:54 United States which has been performing well of course. The IMF thinks the way it's achieved

01:59 that could cause trouble for the global economy. Indeed the upside surprises in the US economy

02:07 has been the main reason for our forecast upgrade. Now that resilience and strong growth

02:15 has come both because of supply factors in particular the strong increase in labor input

02:24 including through immigration as well as strong productivity growth. But there is another

02:29 aspect of this growth which is coming from demand pressures and it's those demand pressures

02:34 that could also put upward, could push up inflation which is why we're calling for a

02:42 gradual and cautious approach in cutting rates going forward. Again to be able to solve the

02:49 inflation problem. So there are hopefully some bright spots to look at and potential

02:54 drivers for growth. What do you think they're going to be? Well we have seen a lot of strength

03:00 again on the supply side in the growth in the global economy and this is not just the

03:05 US, it's also in a number of emerging markets. The scarring from the pandemic, it turns out

03:13 it's not as large as we had previously expected and labor force participation is coming back

03:19 in many many economies. Now I would say the exception to that is the low-income countries

03:24 where our estimates of scarring are now larger than they were previously which is why we

03:29 think it's so important to be able to for the international community to provide support

03:34 to those who need it the most.