The head of the International Monetary Fund (IMF) has issued a stark warning to all nations: get your “houses in order” as the organization projects slower growth and higher inflation for some countries. Kristalina Georgieva, managing director, issued the admonition as the International Monetary Fund (IMF) prepares to publish its World Economic Outlook on Tuesday. Georgieva stated that the publication will demonstrate that, despite there being “notable markdowns” in growth, there will not be a recession. However, this does not mean that nations will not encounter difficulties. In the text of her speech in the United States on Thursday, she said, “All countries must redouble efforts to put their own houses in order.” “There is no room for delay in reforms to enhance economic and financial stability and improve growth potential in a world of greater uncertainty and frequent shocks.” The remarks come three months into the United States’ second term. President Donald Trump, whose protectionist policies and widespread tariffs have rocked global markets and raised fears of a global recession. In her remarks, Georgiana noted the issues that have arisen in recent months. Specifically, she stated that “uncertainty is costly,” stating that the cost of a single item can be affected by tariffs in dozens of countries and cause investment decisions to be postponed, volatility in financial markets, and even questions about which ports ships should sail to. She added, “Protectionism erodes productivity over the long term, especially in smaller economies.” She stated, “In the end, trade is like water: when countries put up barriers in the form of tariff and nontariff barriers, the flow diverts.” Cheap imports may flood some sectors in some countries, while shortages may occur in others. Trade continues, but disruptions cost money. Georgieva urged nations to alter their monetary policies while remaining “agile and credible” in order to reduce debt levels when necessary amid the uncertainty. Some central banks have appeared to be waiting and seeing in the weeks since Trump’s latest round of tariffs went into effect. The major shift in U.S. trade policy and tariff unpredictability, the Bank of Canada stated in a statement, prompts increased uncertainty, diminished prospects for economic growth, and raised inflation expectations. The Bank of Canada did not lower its benchmark rate on Wednesday, keeping it at 2.75 percent. U.S. In addition, Federal Reserve Chair Jerome Powell stated in remarks on Wednesday that, due to concerns regarding the effects of tariffs and inflation, it would probably be necessary to pause before further lowering interest rates. According to Georgieva, a second “hugely important priority” is that nations should refocus on redressing internal and external macroeconomic imbalances, despite the fact that she acknowledged that this can be difficult. The Bank of England also issued a warning last week that Trump’s import tariffs have increased the risks of a hit to the global economy. The director of the IMF then advised the three “largest actors,” China, the European Union, and the United States, to act independently. The IMF advised China to increase “chronically low” private consumption while reducing its industrial policies and “pervasive state involvement” in industry. Even though the IMF says that the U.S. economy has seen strong productivity growth, Georgieva says that the country needs to work on putting its federal government debt on a “declining path.” Georgieva also says that the EU should focus on Germany’s “assertive fiscal expansion” to make it easier to spend on defense and infrastructure, and that the bloc as a whole needs to become more competitive by “deepening the single market.” According to Georgieva, a “reboot” of the global trading system is testing resilience, and trade policy needs to be improved. She stated, “The objective must be to secure a settlement among the largest players that maintains openness and delivers a more level playing field, to restart a global trend toward lower tariff rates while also reducing nontariff barriers and distortions.” “We need a world economy that is more resilient, not a drift toward division,”
The trade war is rocking economies. Get your ‘houses in order,’ IMF urges
