JOHANNESBURG – The downside risks still dominate the global economic outlook, with policy priorities for the G20 finance ministers and central bank governors will focus on building resilience and boosting medium-term growth.
Gita Gopinath, the first Deputy Managing Director of the IMF, states in her closing remarks after the third meeting of G20 finance ministers and central bank governors that high levels of policy uncertainty remained a key theme in these discussions.
“But so too did the shared objective to navigate through this uncertainty and seek ways, domestically and collectively, to spur growth.”
She says in April, the IMF’s World Economic Outlook forecast projected global growth of 2.8 per cent in 2025 and 3.0 per cent in 2026, well below the historical average of 3.7 per cent.
“This included significant downgrades to major economies such as the US and China, owing to greater policy uncertainty, trade tensions and softer demand momentum.
“Global headline inflation was projected to decline, but at a slower pace, reaching 4.3 per cent in 2025 and 3.6 per cent in 2026.”
Gopinath pointed out that since April, economic indicators reflect a complex backdrop shaped by trade tensions.
“We saw strong evidence of front-loading ahead of tariff increases and some trade diversion.
“We also saw an improvement in global financial conditions as select trade deals lowered average tariffs. On inflation, cooling demand and falling energy prices point to a continued decline, albeit with variation across countries.
“While we will update our global forecast at the end of July, downside risks continue to dominate the outlook and uncertainty remains high.”
Against this backdrop, she says, policymakers should focus on resolving trade tensions and implementing macroeconomic policies to address underlying domestic imbalances.
“This includes restoring fiscal space and ensuring debt is on a sustainable path.
“To maintain price and financial stability, monetary policy must be carefully calibrated to country-specific circumstances and use clear and consistent communications. Central bank independence must be protected.
“Structural reforms remain essential to lift medium-term growth and offset demographic shifts, by boosting productivity, supporting job creation and leveraging new technologies.”
Gobinath also emphasised the importance of strengthening public finances.
“The IMF welcomes the renewed focus on domestic revenue mobilisation, which is indispensable for strengthening public finances and helping countries, especially here in Africa, to achieve development goals.
“Our analysis suggests that low-income countries could raise an additional 7 per cent of gross domestic product (GDP) if they achieved their estimated tax potential.”
She said the IMF is playing its part by supporting countries in reforming domestic tax policies and broadening tax bases, strengthening administration to improve tax collection and their efficiency and improving tax legal certainty to attract foreign and domestic investment.
“We also support a stronger focus on public spending efficiency, which is vital for investing in sustainable development within tight fiscal constraints. The IMF is helping through governance diagnostics, macro-fiscal framework design and improvements to public investment management and the management of state-owned enterprises.”
She pointed out that although financial conditions have eased since April, trade and geopolitical uncertainty are still elevated and financial stability risks remain in focus.
“Vigilant surveillance and robust supervision remain paramount and recent progress in financial sector oversight must continue, particularly for NBFIs, which now account for more than 50 per cent of the financial sector.
“Improving cross-border payments systems, including through new financial technologies, can help boost growth and strengthen macro-financial stability.”
South Africa’s Minister for Finance, Enoch Godongwana, stated that the meeting took place during a period of fragile global economic growth.
“While inflation is gradually moderating and financial conditions have started to stabilise in some regions, uncertainty continues to weigh heavily on global growth prospects.
“Rising trade barriers, persistent global imbalances and new geopolitical risks are significant concerns. Many developing countries, especially in Africa, remain burdened by high and rising debt vulnerabilities, constrained fiscal space and a high cost of capital that limits their ability to invest in their people and their futures.”
He warned that technological shifts and climate-related shocks and extreme weather events pushes the achievement of the Sustainable Development Goals (SDGs) by 2030 further out of reach. “Developing countries face a staggering financing gap of US$4 trillion every year.
The message from the Fourth Financing for Development (FfD4) Conference in Spain was unequivocal: we must act decisively, choose cooperation over fragmentation, unity over division and action over inertia – before the window to deliver on our shared commitments closes.
“In the face of these complex challenges, the G20 must remain a source of strategic global leadership, cooperation and action.”
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