IMF warns war, protectionism to hurt world economy

The International Monetary Fund (IMF) urged that the world’s central banks should focus more on fostering economic growth, particularly in countries where inflation is no longer a pressing issue.

In the latest edition of its World Economic Outlook, the Fund acknowledged the return of inflation to more moderate levels but cautioned that escalating regional conflicts and a rise in protectionism present significant risks to a global economy that is struggling to gain momentum, Caliber.Az reports per foreign media.

Petya Koeva-Brooks, IMF Deputy Director of Research, stated, “We think the risks are tilted to the downside,” noting that the Fund's outlook has worsened in the six months since the last WEO update. The IMF still projects a 3.2 per cent growth for the global economy this year, but warned that factors such as weak productivity growth are likely to hinder significant improvement in the coming years. For 2025, it has reduced its growth forecast from 3.3 per cent to 3.2 per cent.

Koeva-Brooks outlined three key policy recommendations, with the first being that central banks should pivot towards providing greater support for economic activity in regions where inflation is under control. Conversely, she emphasized that governments should tighten fiscal policies to conclude the emergency measures initiated during the pandemic and implement structural reforms to enhance productivity and labor supply.

The IMF predicts the eurozone will experience only 0.8 percent growth this year, while the U.S., benefiting from better productivity and labor supply in recent years, is expected to grow by 2.8 percent. However, it anticipates a slight acceleration in the eurozone to 1.1 per cent and a slowdown to 2.2 per cent in the US next year.

The Fund also expects a notable slowdown in China, despite recent attempts by Beijing to bolster the economy, projecting growth of only 4.8 percent this year, below the official target of 5 percent, and a further decline to 4.5 per cent in 2025.

By Vafa Guliyeva