Global economy is resilient but challenged by weak growth: IMF

The IMF said the global economy is resilient, but challenged by weak growth and deepening divergence. In its 2023 Annual Meetings Curtain Raiser Speech here today, IMF Managing Director Kristalina Georgieva said:’’ The world economy has shown remarkable resilience, and the first half of 2023 has brought some good news, largely because of stronger-than-expected demand for services and tangible progress in the fight against inflation. This increases the chances for a soft landing for the global economy. But we can’t let our guard down.’’

‘’While the recovery from the shocks of the past few years continues, it is slow and uneven. As you will see from our updated forecast next week, the current pace of global growth remains quite weak, well below the 3.8 percent average in the two decades before the pandemic. And looking ahead over the medium term, growth prospects have weakened further.’’

Yet, she added, there are stark differences in growth dynamics. Stronger momentum comes from the United States. India and several other emerging economies, including Côte d’Ivoire, are bright spots.But most advanced economies are slowing down. And in China economic activity is below expectation, and many countries struggle with anemic growth.Economic fragmentation, she noted, threatens to further undermine growth prospects, especially for emerging and developing economies, including right here in Africa.

‘’This results in deepening divergence in economic fortunes between and within different country groups. Part of it comes from “economic scarring”. We estimate that the cumulativeglobal output loss from successive shocks since 2020 amounts to $3.7 trillion as of 2023.’’

Given these diverging trends, the Fund has an important role to play to help countries identifypolicy choices and pursue successful growth strategies. Three policy priorities stand out. First, reinforce economic and financial stability. Second, is the need to address infrastructure gaps-old and new. The third pillar is the required improvement in governance and state capacity to foster inclusive growth.

Meanwhile, the UAE Ministry of Finance (MoF) held a meeting with the International Monetary Fund (IMF) Staff Mission at the Ministry’s headquarters in Abu Dhabi to discuss matters related to government budgets and revenues, overall monetary policies, debt management, tax policies and legislations, and government asset management at the Ministry.

Younis Haji Al Khoori, Under-Secretary of Ministry of Finance, Ahmad bin Sulaiman, Director of the Federal Debt Management Office, Fatima AlSheikh, Director of Tax Policies and Legislations Department, Mariam Al Hajri, Deputy Director of the General Budget Department, Moza Saeed Al Matroushi, Head of Organisations, Institutions and Government Investments, and several specialists from the Ministry, met with Dr. Ali Al Eid, Head of the IMF Staff Mission, accompanied by several of IMF’s specialists and staff members.

Both parties explored the latest developments in international monetary and financial systems, and the local, regional, and international economic landscape. The Ministry of Finance presented environmental protection expenditure data to the IMF, to be published on the Climate Change Indicators Dashboard.

Younis Al Khoori emphasised the significance of the Ministry’s meetings with the IMF to exchange views about the UAE’s fiscal policies. He said, “The UAE continues to adopt innovative strategies that support growth and diversify the economy, reflecting on the stability of the financial system, the strength and flexibility of the national economy, and key economic development indicators.”

Al Khoori added, “The UAE’s economy is witnessing exceptional growth in 2023, and the federal budget allocated for the fiscal year 2023 saw an increase, with total estimated expenditures exceeding Dhs63 billion and more than that for revenues. The second quarter of the year saw an increase in the use of goods and services and the acquisition of non-financial assets in most government sectors.

Amidst this performance, the Ministry of Finance continues to coordinate with the IMF to enhance the performance of fiscal and monetary policies and ensure their alignment with best international practices and standards, especially where the global economy faces variables that require unified efforts and visions to find comprehensive developmental, economic, social, and environmental solutions.”

At the end of the meeting, the two sides addressed the acceleration of the UAE’s economy, and the UAE led the Arab world in sovereign credit ratings from major global credit rating agencies. In 2023, it received a sovereign rating of (AA-) with a stable outlook from Fitch and a rating of (Aa2) with a stable outlook from Moody’s.

The Ministry of Finance and the IMF Staff Mission also discussed the importance of enhancing the transparency of the federal government’s financial data to strengthen its borrowing capacity and creditworthiness, commitment to international accounting standards, and best global practices to improve the credibility and reliability of the federal government’s financial data.

WAM