IMF boss warns of low growth and inflation

IMF boss Kristalina Georgiewa has warned of increasing stress for the global economy. « Our new growth forecasts will include significant downward corrections, but will not predict any recession, » said Georgiewa before the start of the spring conference of International Monetary Fund (IMF) and World Bank in Washington. For some countries there will also be upward corrections in the inflation forecast.

At the same time, she warned of the signs of growing nervousness in the financial markets. The uncertainty « literally went through the ceiling, » said Georgiewa. The escalating trade conflict has shaken confidence in the international economic system – and not only put smaller economies under pressure, but also large trading partners.

Small countries between the fronts

The consequences are already noticeable: « Ships at sea no longer know what port they should run in. Investment and consumer decisions are being postponed, » she said. Smaller economies are particularly affected because they are more dependent on open trade.

As the cause, Georgiewa cited an increasing erosion of trust in multilateralism and the international trade system. The number of tariffs and other trade barriers grow – that loads the global exchange and stir up the feeling of economic disadvantage.

« Trade tensions are like a pot that simmered for a long time – and now boiled over, » she said, called on to reduce international tensions and work more closely together.

USA should save, Europe invest in Europe

At the national level, Georgiewa warned a solid budget policy with a view of the United States. The country must reduce its high public debt « to strengthen the resilience of the US economy ». At the same time, she warned of long -term damage caused by protectionist measures that could undermine productivity and competitiveness.

For Europe and especially Germany, Georgiewa recommended a more offensive fiscal policy – for example through higher investments in infrastructure and defense. In addition, there must be progress in building a capital market union in the European Union in order to increase its competitiveness and to meet future shocks better.