Georgieva noted that the U.S. economy is performing "considerably better" than anticipated, although significant uncertainty surrounding the trade policies of President-elect Donald Trump's administration is contributing to challenges for the global economy and pushing long-term interest rates higher.
With inflation approaching the U.S. Federal Reserve's target and evidence of a stable labor market, the Fed may choose to wait for additional data before implementing further interest rate cuts, she indicated. Overall, she anticipated that interest rates would remain "somewhat elevated for an extended period."
The IMF's update to its global outlook will be released just days before Trump assumes office. Georgieva's remarks provide an early glimpse into the IMF's shifting global perspective for the year, although she did not offer specific projections.
In October, the IMF had increased its economic growth forecasts for the U.S., Brazil, and the United Kingdom for 2024, while reducing projections for China, Japan, and the eurozone, citing risks from potential trade conflicts, military tensions, and stringent monetary policies.
At that time, the IMF maintained its forecast for global growth in 2024 at 3.2%, as projected in July, but slightly lowered its global growth forecast for 2025 by one-tenth of a percentage point, cautioning that medium-term global growth could decline to 3.1% in five years, significantly below pre-pandemic levels.
"Not surprisingly, given the size and role of the U.S. economy, there is keen interest globally in the policy directions of the incoming administration, in particular on tariffs, taxes, deregulation and government efficiency," Georgieva remarked.
"This uncertainty is particularly high around the path for trade policy going forward, adding to the headwinds facing the global economy, especially for countries and regions that are more integrated in global supply chains, medium-sized economies, (and) Asia as a region."
Georgieva remarked that it was "very unusual" to observe higher long-term interest rates amid a decline in short-term rates, a phenomenon not commonly witnessed in recent history.
The IMF identified varying trends across different regions, predicting a slight stall in growth for the European Union and a modest weakening in India, while Brazil was experiencing somewhat elevated inflation, according to Georgieva.
In China, the second-largest economy globally, the IMF noted deflationary pressures and persistent issues with domestic demand. She indicated that lower-income nations, despite their reform initiatives, remained vulnerable to new shocks that could adversely affect them.
Georgieva highlighted that the rise in interest rates aimed at curbing inflation had not led the global economy into recession; however, the differing trends in headline inflation necessitated that central bankers closely observe local data. She cautioned that a strong U.S. dollar might lead to increased funding costs for emerging market economies, particularly for low-income countries.
Most nations would need to reduce fiscal spending following substantial expenditures during the COVID pandemic and implement reforms to foster sustainable growth, she stated, emphasizing that this could often be achieved while safeguarding growth prospects. "Countries cannot borrow their way out. They can only grow out of this problem," she asserted, pointing out that the medium-term growth outlook for the world was at its lowest in decades.