The International Monetary Fund's (IMF) Managing Director Kristalina Georgieva said financial stability risks are increased while uncertainties remain high in markets.
"At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates—necessary to fight inflation—inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies," she said Sunday in her prepared remarks at the 2023 China Development Forum.
"Policymakers have acted decisively in response to financial stability risks, and advanced economy central banks have enhanced the provision of U.S. dollar liquidity. These actions have eased market stress to some extent, but uncertainty is high which underscores the need for vigilance," she added.
"Uncertainties are exceptionally high," said Georgieva, due to risks of "geo-economic fragmentation" that could lead the world split into rival economic blocs.
She said such a division would be "dangerous" as it would leave people "poorer and less secure," adding the outlook for the global economy is likely to remain weak in the medium term.
Georgieva said the IMF expects global economic growth to come below 3% this year as many central banks' monetary tightening around the world continues to weigh on economic activity.
Although the year 2024 has a better outlook, global growth next year is estimated to remain below its historic average of 3.8%, according to the IMF chief.
