World economy not doing as bad as feared, says IMF chief

WASHINGTON – The global economy is doing better than expected, even as it faces prolonged uncertainty and underwhelming medium-term growth prospects, said the head of the International Monetary Fund (IMF) on Oct 8.

The world economy is doing “better than feared, but worse than we need”, IMF’s managing director Kristalina Georgieva told reporters in Washington, according to prepared remarks.

She added that the IMF now expects global growth to slow “only slightly this year and next”, propped up by better-than-expected conditions in the United States, and among some other advanced, emerging market and developing countries.

Ms Georgieva’s remarks came ahead of next week’s gathering of finance ministers and central bank governors at the World Bank and the IMF in Washington.

Trade is once again likely to dominate the agenda at the annual meetings, following US President Donald Trump’s decision earlier in 2025 to unleash sweeping tariffs against many countries.

‘Multiple shocks’

“All signs point to a world economy that has generally withstood acute strains from multiple shocks,” Ms Georgieva said, pointing to “improved policy fundamentals”, the adaptability of the private sector, lower-than-expected tariffs and supportive financial conditions.

“The world has avoided a tit-for-tat slide into trade war – so far,” she added.

She noted that the US tariff rate has fallen from 23 per cent in April, to 17.5 per cent on Oct 8 – a figure that nevertheless remains “far above” the rest of the world.

But, she warned, the full effect of those tariffs “is still to unfold”, adding that the resilience of the world economy has yet to be “fully tested”.

Against this backdrop, the IMF still expects global growth to remain at roughly 3 per cent over the medium term, in line with previous forecasts – below the 3.7 per cent, on average, seen before the Covid-19 pandemic.

To boost lacklustre growth prospects, Ms Georgieva called on countries to act swiftly to “durably” lift output, rebuild fiscal buffers and address “excessive” trade imbalances.

IMF’s prescriptions for policymakers differed by region, with Asia urged to deepen its internal trade, and to strengthen the service sector and access to finance.

Carried out correctly, this could raise economic output by as much as 1.8 per cent in the long run, she said.

On the African continent, Ms Georgieva called on countries to promote “business-friendly reforms”, and continue with efforts to build up the African Continental Free Trade Area which, she said, could lift their real gross domestic product per capita by “over 10 per cent”.

Tough love for Europe

Ms Georgieva reserved her harshest criticism for Europe, which has struggled with economic growth in recent years, in marked contrast with the US.

To raise competition in the bloc, she called on the European Union to appoint a new “single-market czar” to drive reforms, a move that would simplify the EU’s structure and consolidate the power to make the changes required.

These changes include steps to deepen EU single-market integration in financial services and energy.

“Complete your project, and catch up with the private-sector dynamism of the US,” she said.

For the world’s largest economy, Ms Georgieva urged the Trump administration to address the country’s federal deficit, and to take steps to incentivise household savings.

And for China, the world’s second-largest economy, she reiterated the IMF’s ongoing calls for fiscal reforms to boost private consumption and reduce dependence on industrial policy to drive growth. AFP