Citing the October 2024 World Economic Outlook, Georgieva started with the positive news: the global economy has held up remarkably well; inflation continues to decline, largely because of measures taken by central banks; and for many countries, a soft landing is in sight.

However, she also noted, “Families are still hurting from high prices. And global growth is still anemic. We expect the global economy to grow by 3.2 percent this year and slow to 3.1 percent annual growth in five years, the lowest medium-term outlook in decades.” Meanwhile, public debt is on track to surpass $100 trillion this year, an all-time high, she said.

Presenting the IMF’s Global Policy Agenda, she noted its focus on two priorities: securing the soft landing, and breaking out of the low-growth, high-debt path. To get there, it will be important to move inflation back to target; deal with high debt and deficits; and carry out growth-boosting reforms. As these challenges are being tackled, it will be essential for cooperation on climate, technology, debt, and trade to continue, she said.

Policymakers must turn their attention to fiscal policy to stabilize debt and create space for investment that can spur global economic growth, IMF Managing Director Kristalina Georgieva told a debate on the global economy on Thursday. 

The world must overcome an “unforgiving combination” of low growth and high debt while people are still angry about the inflation shock that led to a spike in consumer prices, the IMF managing director said.  

Global economic growth is expected to hold steady at 3.2 percent this year and next, but public debt is seen exceeding $100 trillion, or 93 percent of GDP, by the end of this year, according to IMF projections. 

Vera Daves de Sousa, Angola’s finance minister, said cash-strapped governments must make the right fiscal choices at a time of widespread political and social pressures. “Citizens are waiting for answers,” she said.  

Fiscal rules 

In Europe, fiscal rules must be loosened to boost investment and growth, according to Jean Pisani-Ferry, a senior fellow at the Bruegel think tank in Brussels. “We have no growth,” he said. “That makes all the problems we face more difficult.” 

Klaas Knot, President of De Nederlandsche Bank and Chair of the Financial Stability Board, agreed that spending must increase but called for greater integration and dismantling of trade barriers. “We can increase our growth potential and become more innovative.” 

Harvard Business School’s Laura Alfaro, a former minister of national planning and economic policy in Costa Rica, pointed to the success of reforms in stabilizing Latin America’s previously crisis-prone economies. Fiscal rules can work when they are flexible, she said, pointing to Jamaica’s success in repairing its public finances. 

G20 Reaffirms Commitment to Supporting Low-Income Nations and Tackling Climate Change 

Brazil’s Finance Minister Fernando Haddad has reaffirmed the G20’s commitment to financial stability, fiscal sustainability, and climate action, with a focus on supporting low-income and heavily indebted countries. During a press briefing, Haddad emphasized the need for these priorities to evolve in response to global challenges. 

The impact of global market volatility and geopolitical shifts was also a key topic, with Haddad and Central Bank President Roberto Campos Neto discussing how the U.S. elections could affect global markets, particularly regarding migration, fiscal policies, and protectionism. 

As Brazil prepares to transfer the G20 presidency to South Africa in December, Haddad stressed the importance of maintaining continuity in the G20’s agenda. He expressed confidence that South Africa would further the initiatives led by Brazil, particularly in financial inclusion, climate action, and taxation of the wealthy. Reforming multilateral development banks and enhancing global cooperation will remain critical G20 objectives.  

IMF First Deputy Managing Director Gita Gopinath welcomed new partners to the Global Public Finance Partnership (GPFP) today: the European Commission, Denmark, Norway, and the Kingdom of Saudi Arabia.  

Gopinath said the GPFP, launched earlier this year to provide fiscal capacity development to emerging and developing economies, combines “under one roof the IMF’s fiscal capacity development support on revenue and spending. It also integrates cross-cutting priorities—including climate change, gender, inclusion, and digitalization.” She said the support GPFP provides comes at a critical moment, given the “difficult” economic environment facing member countries, and thanked partners for supporting the initiative.  

Fiscal Affairs Department director Vitor Gaspar said the GPFP builds on FAD’s 60-year history of providing technical assistance to member countries, and that the goal is to put scarce public resources to good use. Ministers of finance from Côte d’Ivoire and Paraguay shared their countries’ transformative experiences with capacity development. And high-level officials from Belgium, Luxembourg, the EC, and Norway highlighted the importance of the GPFP and their cooperation with the Fund on capacity development.  

The new partners join initial GPFP partners Belgium, France, Germany, Japan, Luxembourg, the Netherlands, Sweden, Switzerland, and the United Kingdom. 

ECB Back to Normal Monetary Policy

The European Central Bank (ECB) had to significantly change its monetary policy approach and communication when inflation picked up in the euro area, Bank of Italy governor Fabio Panetta said in the Governor Talks series. During the pandemic, when inflation was close to zero and the euro area policy rate was “at the zero lower bound,” the bank adopted “full commitment and forward guidance,” the former ECB executive board member said. “Then, when inflation became very variable and difficult to predict, we moved to a meeting by meeting [approach]. So from full commitment to no commitment.” 

As inflation converges towards the ECB target (of close but below 2 percent), Panetta believes that the euro area central bank can now focus its communication on the so-called reaction function of monetary policy, providing more guidance in line with its medium-term orientation and scenarios. “Finally, we should go back to a normal way to do monetary policy.” The Italian governor said the ECB projects converging to its inflation target in the earlier part of next year. “We were projecting … that we would get to 2 percent at the second half of 2025. That is going to happen much earlier,” he said. 

Panetta also commented on the ECB’s digital euro project, highlighting that the monetary authority’s main goal is to provide a digital version of the euro banknotes. “We cannot exclude that in the future cash will become a marginal means of payment.” Should that happen, “we might end up in a situation in which there is no means of payment that is issued by the central bank.” The euro area would then become a “strange” monetary union, “in which there is no public money, no common means of payment.” 

Bank of Japan’s Ueda Says Policy Remains “Fairly Easy”

Bank of Japan Governor Kazuo Ueda said it’s still early days for normalizing monetary policy, which remains “fairly easy.” But after raising the policy interest rate for the first time since 2007 and ending quantitative and qualitative monetary easing with yield curve control, the takeaways will take more time to come into focus. 

“We’re just a couple steps into normalizing policy and I think it’s too early to draw any solid lessons from our experience,” but the approach appears successful so far, Ueda said in a talk Wednesday with IMF Asia-Pacific Department Director Krishna Srinivasan. “The lucky part came from the very slow pace at which underlying inflation went up.” 

Ueda, who held roles in academia before taking the central bank’s top job in April 2023, also touched on demographics and the connection to prices. He pointed out several channels that negatively affected aggregate demand. “But now, the labor supply is shrinking in real time, so there’s a serious excess demand for labor in the market, which is now a factor in increasing wages,” he said. “And to some extent it’s been inflationary.” 

AI in Public Finances

The workshop on GovTech and Artificial Intelligence (AI) in Public Finance on Wednesday showcased the experiences of several countries, offering valuable insights for others.

The first panel underscored that interoperability of digital fiscal platforms, as a part of Digital Public Infrastructure (DPI) initiatives, has been implemented in many nations (eg, Estonia and India) and often led to more efficient fiscal digital ecosystems.

The second panel explored the transformative potential of both traditional and generative AI for ministries of finance, showing the experiences of Australia and Georgia. One takeaway was that finance ministries have a unique opportunity to spearhead the digital revolution within their governments.