IMF chief says global economy doing 'better than feared,' risks remain

Financial market valuations are also heading toward levels last seen during the internet-related bullishness 25 years ago, she says

International Monetary Fund (IMF) Managing Director Kristalina Georgieva delivers remarks ahead of the annual IMF-World Bank fall meetings, at the Milken Institute in Washington, DC, US, Oct 8, 2025. REUTERS/Jonathan Ernst

The world economy has proven more resilient than expected despite acute strains from multiple shocks, the head of the International Monetary Fund said on Wednesday, forecasting only a slight slowing of global growth this year and in 2026.

IMF Managing Director Kristalina Georgieva said recent economic data showed a softening in the US economy, but it had dodged a recession feared by many experts just six months ago.

The US economy and many others had held up, given better policies, a more adaptable private sector, less severe import tariffs than feared - at least for now - and supportive financial conditions, she told an event hosted by the Milken Institute in Washington.

"We see global growth slowing only slightly this year and next. All signs point to a world economy that has generally withstood acute strains from multiple shocks," Georgieva said in a preview of the IMF's upcoming World Economic Outlook.

In July, the IMF raised its global growth forecast by 0.2 percentage point to 3.0 percent for 2025 and by 0.1 percentage point to 3.1 percent for 2026.

It will release a fresh outlook next Tuesday during the annual meetings of the IMF and World Bank in Washington. The gathering takes place at a time when US President Donald Trump has upended global trade with steep tariffs and cracked down on immigration, and artificial intelligence is rapidly transforming technology and the outlook for labor.

The world economy is doing "better than feared, but worse than needed," Georgieva said, noting that the IMF was forecasting global growth of roughly 3 percent over the medium-term, well below the 3.7 percent forecast before the COVID-19 pandemic.

Georgieva cited deep undercurrents of marginalisation, discontent and hardship around the world, and said the global economy faced an array of risks.

Uncertainty is at exceptionally high levels and continuing to climb, while demand for gold - a traditional safe-haven asset for investors - is surging, Georgieva said, adding that holdings of monetary gold now exceeded 20% of the world's official reserves. Gold hit a record high on Tuesday as a US government shutdown persisted and expectations for a Fed rate cut this month boosted demand.

The US tariff shock has been less severe than initially announced in April, with the US trade-weighted tariff rate now around 17.5 percent, down from 23 percent in April, and countries largely skipping retaliatory tariffs.

But US tariff rates keep changing, and US inflation could rise if companies started to pass through more of the cost of tariffs, or if a flood of goods previously headed for the US triggered a second round of tariff hikes elsewhere.

Financial market valuations are also heading toward levels last seen during the internet-related bullishness 25 years ago, she said. An abrupt shift in sentiment - such as what happened during the dot.com crash of March 2000 - could drag down world growth, making life especially tough for developing countries.

"Buckle up," Georgieva said, adding, "Uncertainty is the new normal and it is here to stay."

GEORGIEVA WARNS ON DEBT LEVELS

The IMF chief urged countries to durably lift growth by boosting private-sector productivity, consolidating fiscal spending, reducing debt and addressing excessive current account imbalances, which would allow them to rebuild their buffers to prepare for the next crisis.

"As we have seen, these imbalances can trigger a protectionist backlash and - being mirrored by net capital flows - can fuel financial stability risks," Georgieva said. "We at the IMF are working hard to refine our external sector assessments and will keep pushing key players for policy correctives."

Global public debt is expected to exceed 100 percent of GDP by 2029, Georgieva said.

Competition is key, along with free-market-friendly property rights, rule of law, strong financial sector oversights and accountable institutions.

In Asia, countries need to deepen trade and carry out reforms to strengthen the service sector, Georgieva said. A push to lower non-tariff barriers and boost regional integration could lift gross domestic product by 1.8 percent in the long run.

In Sub-Saharan Africa, business-friendly reforms could boost the real GDP per capita of the median African country by more than 10 percent. Europe should forge ahead with building a single market, which could help it catch up with the dynamism of the US private sector, she said.

The US should take "sustained action" to lower its federal debt, with the debt-to-GDP ratio on track to exceed its all-time high after World War Two, Georgieva said. It should also work to boost household saving, such as through favorable treatment of retirement savings.

China also has work to do, including boosting fiscal spending on social safety nets and property sector clean-up, while cutting spending on industrial policy initiatives, she said.