Saturday, June 22, 2024

IMF chief Georgieva warns of spending ‘pressure’ before global 2024 elections

WASHINGTON, JANUARY 15: The year ahead will be “very tough” for fiscal policy ~ especially for countries holding elections ~ the IMF chief said before departing for the World Economic Forum in Davos, Switzerland.
“This is going to be a very tough year, because fiscal policy has to rebuild buffers and deal with the debt that was accumulated in many countries”, International Monetary Fund Managing Director Kristalina Georgieva said in an interview in Washington.
“About 80 countries are going to have elections, and we know what happens with pressure on spending during election cycles”, she continued.
Billions of people in dozens of countries around the world are due to go to the polls this year, from India to the United States, putting pressure on Governments to either raise spending or cut taxes to win popular support.
The IMF is due to publish updated economic forecasts later this month which will show the global economy is broadly “on track” to meet its previous forecasts, according to Georgieva.
The global economy is “poised for a soft landing”, she said, adding: “Monetary policy is doing a good job, inflation is going down, but the job is not quite done.” “So we are in this trickiest place of not easing too fast or too slow”, she further added.
In the US, the Federal Reserve recently held interest rates at a 22-year high and penciled in as many as 3 interest rate cuts this year, while the European Central Bank has also stopped hiking interest rates.
These steps have led traders to become more optimistic about the possibility of a loosening of monetary policy in the months ahead, which can act to boost economic growth.
The concern at the IMF, Georgieva said, is that Governments around the world spend big this year and undermine the progress made in the fight against high inflation.
“If monetary policy tightens and fiscal policy expands, going against the objective of bringing inflation down, we might be for a longer ride”, she added.
AI to impact 60% of advanced economy jobs
Artificial intelligence (AI) will impact 60% of jobs in advanced economies said Georgieva.
“Advanced economies, some emerging markets, are going to see 60% of their jobs impacted”, she said in an interview in Washington, citing an International Monetary Fund report published Sunday on the topic.
“And then it goes down to 40%, for emerging markets, 26% for low-income countries”, she added, referencing the IMF report, which notes that overall, almost 40% of global employment is exposed to AI.
The IMF report notes that half of the jobs impacted by AI will be negatively affected, while the rest may actually benefit from enhanced productivity gains due to AI.
“Your job may disappear altogether ~ not good ~ or artificial intelligence may enhance your job, so you actually will be more productive and your income level may go up”, Georgieva said.
While AI will initially have a lower impact on emerging markets and developing economies, they are also less likely to benefit from the advantages of the novel technology, according to the IMF.
“This could exacerbate the digital divide and cross-country income disparity”, the report continued, adding that older workers are likely to be more vulnerable to the change brought about by AI. The IMF sees an important opportunity for policy prescriptions to help address these concerns, Georgieva said.
“We must focus on helping low-income countries in particular to move faster to be able to catch the opportunities that artificial intelligence will present”, she said.
“In other words, embrace it, it is coming”, she added. “So artificial intelligence, yes, a little scary. But it is also a tremendous opportunity for everyone.” (AFP)