IMF chief confident on soft landing

Cautions to expect the unexpected in wake of Covid-19 pandemic

LONDON:

The International Monetary Fund (IMF) is now “very confident” the global economy will see a soft landing, its Managing Director Kristalina Georgieva said on Monday, adding that interest rates would start coming down around mid-year.

“We are very confident that the world economy is now poised for this soft landing we have been dreaming for,” after some of the sharpest interest rate hikes in decades, Georgieva said at the World Governments Summit in Dubai.

On the prospect of interest rates being cut in leading economies like the United States, she added, “I expect to see by mid-year interest rates going in the direction inflation has been going on for the last year.”

She cautioned to expect the unexpected in the wake of the Covid-19 pandemic and said a prolonged war between Israel and Hamas would impact global economies.

“I fear most a longevity of the conflict because (if) it goes on and on the risk of spillovers go up,” the IMF chief said.

Read IMF says global ‘soft landing’ in sight

“Right now we see a risk of spillover from the Suez Canal,” she said referring to recent attacks on ships in the Red Sea. “But if there are other unintended consequences in terms of where the fighting goes, then it can become much more problematic for the world as a whole.”

A day ago, Georgieva said Middle East economies were lagging below growth projections due to oil production cuts and the Israel-Gaza conflict, even as the global economic outlook remained resilient.

Despite uncertainties, “the global economy has been surprisingly resilient,” the IMF managing director told the Arab Fiscal Forum in Dubai, while warning of a potential wider impact on regional economies of continued conflict in Gaza.

Published in The Express Tribune, February 13^th, 2024.

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