REFORM TALKS with Kristalina Georgieva
Kristalina Georgieva, the Managing Director (MD) of International Monetary Fund (IMF) was recently at the opening to the public of the Milken Center for Advancing the American Dream in September 2025 in the United States (US). There, at the Milken Institute where many people gathered for the event, she made a presentation in which she shone some light on different economic issues, including the fact that, “uncertainty is the new normal; it is here to stay.” Excerpts:
Good morning. And thank you, Mike, for inviting the IMF to be part of the opening of this beautiful new center. I cannot think of a better place to talk about the pursuit of opportunity than here – it is exactly what the center is about.
As I look at the world over the decades, I see incredible progress, but also unfulfilled dreams. The average person today is much better off than, say, 30 years ago, but the averages conceal deep undercurrents of marginalization, discontent, and hardship.
Many people in many places – especially the young – are taking their disappointment to the streets: from Lima to Rabat, from Paris to Nairobi, and from Kathmandu to Jakarta, all are demanding better opportunity.
In the U.S., your chances of growing up to earn more than your parents keep falling. Here too, discontent has been evident – and has helped precipitate the policy revolution that is now unfolding, reshaping trade, immigration, and many international frameworks.
All of this plays out against a backdrop of deep transformations: in geopolitics; in technology; in demographics, with populations surging in some places and shrinking in others; and in the mounting harm we do to our planet.
The result is exceptionally high uncertainty: globally it has shot up and continues to climb. Buckle up: uncertainty is the new normal and it is here to stay.
Next week, as the world’s finance ministers and central bank governors gather at our Annual Meetings, the most pressing questions will be about the global economic impact of these forces of transformation and the policy turbulence we are seeing.
How is the world economy coping? Short answer: better than feared, but worse than we need. When we met in April, many experts – not us – predicted a U.S. recession in the near term, with negative spillovers to the rest of the world. Instead, the U.S. economy as well as many other advanced and emerging markets, and some developing countries, have held up.
As our World Economic Outlook will explain next week, we see global growth slowing only slightly this year and next. All signs point to a world economy that has generally withstood acute strains from multiple shocks.
How do we explain this resilience? I would point to four reasons: One, improved policy fundamentals; two, private sector adaptability; three, less severe tariff outcomes than initially feared- for now; and four, supportive financial conditions-for as long as they hold.
Let me elaborate. First reason: better policy fundamentals and global coordination. In many parts of the world, sustained efforts have delivered more credible monetary policy, deeper local currency bond markets, new fiscal rules, and – during the pandemic – swift, decisive, and globally coordinated fiscal action to limit the immediate pain and the lasting scars.
Emerging market economies, especially, have significantly upgraded their policy frameworks and institutions. We just put out a report on progress, quantifying the gains. These economies now perform better when shocks strike than before the global financial crisis.
Good policy makes a difference. Second reason for resilience: private sector adaptability. Just look at private initiative in world trade: companies have been frontloading import orders in advance of tariff hikes and reorganizing their supply chains.
Corporate balance sheets are generally strong after years of robust profits, reflexes are quick after the dry runs of shock after shock, artificial intelligence is becoming mainstream, and change is faced as a challenge and embraced as an opportunity.
Third reason: tariffs, where the shock has not been as large as initially announced.
The U.S. trade-weighted tariff rate has fallen from 23 percent in April to 17½ percent now- still much higher than before. The U.S. effective rate is now far above the rest of the world’s, which has held relatively steady this year, with very few cases of retaliation.
In short, the world has avoided a tit-for-tat slide into trade war-so far. But openness has nonetheless taken a big hit.
And the story is not over-U.S. tariff rates keep moving. Trade deals with the UK, the EU, Japan, and soon Korea have nudged some rates down while disputes with Brazil and India have pushed others up. Other countries’ rates are also likely to move.
Fourth reason: supportive financial conditions. Fired up by optimism about the productivity-enhancing potential of AI, global equity prices are surging. This, plus tight risk spreads, leaves funding markets generally wide open-and the dollar’s slide earlier this year gives precious relief to non-U.S. borrowers with dollar-denominated debt.
So there we have it: four factors behind the economic resilience we have seen this year. But before anyone heaves a big sigh of relief, please hear this: global resilience has not yet been fully tested.
And there are worrying signs the test may come. Just look at the surging global demand for gold. Spurred by valuation effects and net purchases-partly reflecting geopolitical factors-holdings of monetary gold now exceed one-fifth of the world’s official reserves.
On tariffs, the full effect is still to unfold. In the U.S., margin compression could give way to more price pass-through, raising inflation with implications for monetary policy and growth. Elsewhere, a flood of goods previously destined for the U.S. market could trigger a second round of tariff hikes.
Yes, world trade is rippling but still flowing-like water, it’s not easy to plug and stop. For now, most of the world’s trade still follows the rules. We at the IMF urge the world’s policymakers: please keep it this way; preserve trade as an engine of growth.
As for easy financial conditions-which are masking but not arresting some softening trends, including in job creation-history tells us this sentiment can turn abruptly.
