Africa vital to global economic wellbeing – Georgieva

The managing director of the International Monetary Fund has said the world’s economic future is dependent on a prosperous Africa, as she called for greater cooperation across the developed and developing world.

Kristalina Georgieva was speaking as the IMF’s annual meetings opened this week in Marrakech, bringing together finance ministers and central bank governors from 190 countries. It will be 50 years since the meetings were last held in Africa—in Nairobi in 1973 .

“In the fifty years since our last meetings in Africa, the world has transformed in so many ways—life expectancy is up, globally poverty has declined, the international monetary system has adapted to a flexible exchange-rate regime, and technology has transformed the way we work, entertain and communicate,” Georgieva said. “But inequalities within and across countries have increased and we are facing an existential climate crisis. And growth has been on a declining path over the last decade.

“This demands actions to pave the way to the next 50 years. Our goal must be to build bridges to strong future growth that is both sustainable and inclusive.”

She continued: “To put it simply, a prosperous world economy in the 21st century requires a prosperous Africa . Advanced economies are rapidly ageing, but they have abundant capital. The key will be to better connect that capital to Africa’s abundant human resources—to inject more dynamism into the current anaemic global growth outlook.

“Africa also makes the strongest case for building economic resilience. The COVID-19 pandemic, Russia’s war in Ukraine, climate disasters, the cost-of-living crisis, political instability: these are the many faces of a shock-prone world. Their impact is most fully on display in Africa, as is the overwhelming necessity to better prepare ourselves for that world.

“And a prosperous Africa requires maintaining the most important bridge of all, the bridge that connects all countries—that of international cooperation .”

Looking to the global economy Georgieva world economy has shown remarkable resilience, and the first half of 2023 has brought some good news, largely because of stronger-than-expected demand for services and tangible progress in the fight against inflation.

“This increases the chances for a soft landing for the global economy. But we can’t let our guard down.,” she added. “While the recovery from the shocks of the past few years continues, it is slow and uneven. As you will see from our updated forecast this week, the current pace of global growth remains quite weak, well below the 3.8 percent average in the two decades before the pandemic. And looking ahead over the medium term, growth prospects have weakened further.

“Yet, there are stark differences in growth dynamics. Stronger momentum comes from the United States. India and several other emerging economies, including Côte d’Ivoire, are bright spots. But most advanced economies are slowing down. And in China economic activity is below expectation, and many countries struggle with anaemic growth. Economic fragmentation threatens to further undermine growth prospects, especially for emerging and developing economies, including right here in Africa.

“This results in deepening divergence in economic fortunes between and within different country groups. Part of it comes from ‘economic scarring’. We estimate that the cumulative global output loss from successive shocks since 2020 amounts to $3.7 trillion as of 2023.”

Georgieva continued: “This loss is unevenly distributed across countries. The US is the only major economy where output has returned to its pre-pandemic path. The rest of the world is still below trend, with low-income countries being hit the hardest. Why? Because they have had extremely limited capacity to buffer their economies and support the most vulnerable.

“Divergence is also driven by differences in policy space and macroeconomic fundamentals, in the extent of dependency on fuel and food imports, in the share of goods versus services in the economy, the role of trade, reform momentum, and the pace of the fight against inflation—all those affect both countries’ policy choices and their economic performance. What this leads to is countries increasingly marching to their own tune.”

“Given these diverging trends, the Fund has an important role to play to help countries identify policy choices and pursue successful growth strategies.”

Georgieva said: “Let me conclude by returning to 1973, the last time the annual meetings were held in Africa. Back then, delegates faced many of the same challenges we face now: high inflation, conflicts, and fundamental economic shifts.

“In his speech at the Annual Meetings, Kenyan president Jomo Kenyatta declared the ‘need for effective cooperation has never been greater.’ And he finished with one word: ‘Harambee,’ meaning ‘pulling together in full cooperation’.

“With the right policies—and Harambee—we can build a bridge to a more prosperous and peaceful future. We can lay the groundwork for a half century even more impressive than the last.”