Global growth to fall below 3%: IMF chief

The International Monetary Fund's chief said on Thursday the world economy is expected to grow less than 3 percent this year, and a robust recovery is unlikely.

"With rising geopolitical tensions, with inflation still running high, a robust recovery remains elusive," the IMF's Managing Director Kristalina Georgieva said in a speech ahead of the IMF and World Bank's spring meetings next week.

"That harms the prospects of everyone, especially for the most vulnerable people and most vulnerable countries," Georgieva said at an event in Washington.

Global growth almost halved last year to 3.4 percent as the impact of the Russia-Ukraine crisis rippled through the world economy, abruptly halting the recovery from the COVID-19 pandemic.

While a slowdown is expected for 90 percent of the world's advanced economies, Asia's emerging markets are expected to see substantial increases in economic output, with India and China predicted to account for half of all growth this year, Georgieva said.

Earlier at the China Development Forum in Beijing, Georgieva described the emergence of "green shoots" in the Chinese economy.

She said China's economic resurgence would contribute about one-third of global growth this year and a 1 percent increase in China's GDP growth would raise the average growth of other Asian economies by 0.3 percent.

Karen Dynan, a nonresident senior fellow at the Peterson Institute for International Economics, said at a webinar on March 28 that China is rebounding. "That's on the earlier-than-expected reopening after COVID, but it also is from a fading drag from the property crisis," she said.

Dynan expects below-trend global growth in 2023 and 2024 rather than recessions in most countries.

Emerging resilience

"The incoming economic data has shown more resilience than expected," she said, adding that the slowdown in demand in the United States is limited as yet and Europe looks like it has dodged a recession.

In addition, Dynan mentioned the recent banking crisis, pointing to a series of sudden liquidity problems at Credit Suisse, Silicon Valley Bank and US regional lender Signature Bank.

"From the perspective of the forecast, it has increased uncertainty. All else equal, the banking troubles are likely to lead to tighter credit conditions as banks respond to the outflow of deposits, stricter supervision and possible regulatory changes," said Dynan, who expects "a modest additional drag on economic activity".

Anna Gelpern, also a nonresident senior fellow at the Peterson Institute, said in the webinar that the banking crisis headlines "obscure more than they reveal".

There are "very dramatic differences" among the banks that are in trouble, those that have failed, and those that remain, she said.

"It doesn't mean that there are no vulnerabilities. It doesn't mean that we're not worried about the credit supply or the flow of deposits from smaller banks to big ones and the inflows into money market funds," Gelpern said.

"But … there is no reason so far to suggest that there is a banking crisis. There's every reason to think that there are some very badly managed and terribly supervised banks whose failure has spillover effects."

She described the bank troubles as a "tremendous supervisory failure". "There have been warnings; warnings were ignored, or the response wasn't quick enough," Gelpern said.

Agencies and Zhao Ruinan in Beijing contributed to this story.