The International Monetary Fund (IMF) managing director, Kristina Georgieva, addressed the global economy’s resilience in spite of various challenges such as short-term oil production cuts, the Israel-Gaza conflict, and tight monetary policies in the Middle East. She spoke at the World Governments Summit in Dubai on February 11th and stated that surprisingly, the global economy has exceeded growth expectations in 2023.
Georgieva noted that the Israel-Gaza conflict and rising freight costs have had a significant impact on neighboring economies. Additionally, a nearly 50% drop in Red Sea transit volumes has also affected these economies negatively. Any further widening of the conflict could worsen their economic situation even more.
The decline in oil demand is becoming increasingly challenging for net energy importers, who are already limited by historically high debt and borrowing needs. Furthermore, they have limited access to external financing due to this issue. Georgieva emphasized that eliminating regressive energy subsidies would discourage pollution and help improve social spending.
In addition to these challenges, Georgieva stated that while growth in 2024 is expected to surpass the previous year’s growth, the global medium-term growth prospects remain anemic. The IMF expects 2024 GDP growth for the Middle East and North Africa (MENA) region to reach only 2.9%, down from 3.4% previously. However, despite these challenges, Georgieva remains optimistic about the future of the global economy and believes that with appropriate policy measures, it can continue to grow sustainably over time.
In conclusion, Georgieva’s speech at the World Governments Summit highlighted several challenges facing the global economy but also emphasized its resilience in spite of them. She urged policymakers around the world to take actionable steps to address these challenges and ensure sustainable economic growth for years to come.
On February 12th, The IMF will be publishing a paper recommending gradual energy subsidy reforms for countries in MENA region which could save $336bn equivalent to economies of Iraq and Libya combined . Georgieva suggested that eliminating regressive energy subsidies would encourage pollution reduction and improve social spending which will benefit countries long term