Silvana Tenreiro, chief economist of the International Monetary Fund (IMF), has warned that the global economy’s margin of safety is nearing exhaustion. The statement was made on October 13 during the autumn session of the IMF and World Bank governing bodies in Bangkok.
According to Tenreiro, despite the economy’s demonstrated resilience, it faces serious constraints as rising public debt servicing costs erode national budget reserves. She noted that increasing borrowing costs could crowd out critical expenditures in other areas and deprive governments of resources needed during future economic 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 said, adding that the recording of her remarks is available on the IMF’s YouTube channel.
The IMF’s report on global economic prospects describes a negative scenario where rising commodity prices and concerns about government finances could trigger revised risk assessments and heightened inflation expectations. In this case, growth rates for both developed and developing economies by 2027 may fall by 50-60 basis points below the baseline forecast of 3.4%.
To address these threats, Tenreiro recommended that heavily indebted countries initiate fiscal consolidation measures. She emphasized that any population support programs should be temporary and targeted, while financial regulators must maintain tight monetary policies to combat inflation—a goal requiring central banks to operate independently.
