IMF forecasts weakest global growth rate in over 30 years

The International Monetary Fund (IMF) has recently released its weakest global growth expectations for the medium term in more than 30 years. The forecast indicates that five years from now, global growth is expected to be around 3 percent. CNBC Africa caught up with Pierre-Olivier Gourinchas, Chief Economist at the IMF during this year's spring meetings in Washington DC to delve deeper into the implications of these projections for emerging markets. The global economy is on a path of gradual recovery from the impact of the pandemic and the Russian invasion of Ukraine. However, growth remains slow, with expectations that it will be slower this year compared to last year. Inflation is also predicted to decrease. While parts of the emerging market space have shown signs of turning the corner, particularly in developing Asia where growth is robust due to factors like the reopening of China, the picture is not as bright in other regions. Low-income and developing countries, including parts of Africa, are experiencing challenges in achieving significant growth rates. While some regions are recording growth of about 5 percent, when adjusted for population growth, the income per capita growth stands at a modest 2.8 percent. This indicates a widening gap between low-income and middle-income countries, with limited prospects for convergence. Discussing the inflationary environment, Gourinchas highlighted that while inflation is expected to decrease globally, emerging markets, especially regions like sub-Saharan Africa, continue to grapple with double-digit inflation rates. The rise in energy and food prices has been a significant factor driving inflation in these economies. Despite gradual decreases, the persisting high inflation poses challenges, especially in an environment where growth is moderate. To combat inflation effectively, Gourinchas emphasized the importance of establishing a credible nominal anchor through a stable monetary policy framework. Several emerging market economies have already begun tightening monetary policies to address inflationary pressures. Fiscal policies are crucial in supporting monetary measures, but the challenge lies in the high levels of government debt in many emerging markets. Low-income countries face the additional burden of limited fiscal space due to debt distress or near debt distress situations. Improving revenue mobilization through enhanced tax collection systems and engaging in discussions for debt restructuring with creditors are vital steps for these countries. The path to economic recovery for emerging markets involves a delicate balance between addressing inflation and stimulating growth. While the fight against inflation requires prudent monetary policies and fiscal support, countries with high debt levels must navigate complex challenges to enhance their fiscal space and manage debt sustainability effectively. The road ahead may be challenging, but strategic measures and collaborations with international entities like the IMF can pave the way for sustainable economic progress.