IMF chief says markets have good reasons to be more upbeat on economy

DUBAI: The head of the International Monetary Fund (IMF) said on Monday that financial markets have good reason to be more upbeat, pointing to the US economy likely avoiding recession and China’s reopening from pandemic controls.

IMF Managing Director Kristalina Georgieva, speaking at the World Government Summit, described the IMF’s outlook for 2023 as “less bad, not good” given that the Fund has forecast a slowdown in economic growth this year and inflation remained a concern.

Positive factors were resilient US and EU labour markets, China’s reopening and “surprisingly good results of central banks tightening up financial conditions and inflation finally trimming down, although the fight is not yet won”, she added.

Full brunt of financial tightening yet to materialize: IMF

Asked whether there would be more doses of monetary tightening, Georgieva said the Fund expected monetary tightening this year but did not project it would continue “way into” 2024.

“The markets have good reason to be more upbeat because what they are finally seeing is the US economy likely to avoid recession...they are also seeing China re-opening and Chinese consumers rushing to spend the money they saved during the pandemic, the lockdown,” she said.

The IMF chief was speaking in an onstage interview at the annual summit hosted by Dubai in the United Arab Emirates (UAE).

Georgieva lauded Gulf Arab oil and gas producers for “relentlessly” pursuing fiscal reforms, including diversifying revenue sources by introducing new taxes.

The UAE will host the COP28 climate conference in November.

The designation as COP28 president of the country’s climate envoy, who is also head of the state oil firm, has fuelled activists’ worries that big industry was hijacking the global response to the warming crisis.

Asked about the criticism, Georgieva said: “Our focus is on what needs to be done and how we can do it together”.

“We talk about inclusive approach to fighting the climate crisis. Inclusive is exactly that: all hands on deck,” she said.

“If we miss, yet again, a chance to deliver on our own promises, we are all cooked.