The global economy is set to experience the weakest growth since 1990, according to the managing director of the International Monetary Fund, Kristalina Georgieva. The effects of the COVID-19 pandemic and the Russian invasion of Ukraine in 2022 have caused an economic slowdown that risks persisting for up to five years. Georgieva predicts that global growth will remain at around 3% for the next five years, its lowest medium-term forecast since 1990.

Due to rising borrowing costs and reduced demand for exports, low-income countries are also suffering. Georgieva warns that 90% of advanced economies will experience a decline in their growth rate in 2023, with activity in the US and the Eurozone affected by higher interest rates. However, policymakers will have to “stay the course in the fight against inflation,” and continue using higher interest rates to tackle inflation and provide support for struggling banks.

The IMF meetings next week will be the first since the autumn, where Britain was under the spotlight, and the crisis in the UK pension industry highlighted the vulnerability of the global financial system to rising interest rates. Georgieva urges policymakers and readers not to be complacent and stresses that there are still dangers and vulnerabilities in the banking system that may be hidden beyond banks.