Washington —

The head of the International Monetary Fund said on Thursday that strong growth in the United States is helping to boost the world economic outlook, but more needs to be done to stem the decline in productivity.

“Global economic growth is slightly stronger due to strong economic activity in the United States and many emerging market economies,” IMF Managing Director Kristalina Georgieva told reporters in prepared remarks.

The U.S. economy grew 2.5% last year, far outpacing most other advanced economies, according to the U.S. Department of Commerce.

“Strong household consumption and business investment, as well as easing supply chain problems, have helped,” Georgieva added. “Inflation is falling, a bit faster than previously expected.”

She spoke days ahead of the International Monetary Fund and World Bank’s spring meeting of world financial leaders in Washington, one of two such meetings hosted by the international financial institutions each year.

Her comments indicate that the IMF now expects the world economy to grow faster than it forecast in January, when it forecast global growth of 3.1% in 2024 and 3.2% in 2025.

“It’s easy to breathe a sigh of relief. As some predicted, we avoided a global recession and a period of stagflation,” Georgieva said. “But there’s still a lot to worry about.”

One of the challenges Georgieva cited was rising geopolitical tensions, which she said was increasing the risk of a fragmentation of the global economy.

She also highlighted the challenges of growing public debt and a “general slowdown in productivity”.

As a result, the IMF expects growth to remain at just over 3% over the medium term, below the historical average.

To help the global economy heal and resolve productivity challenges, Georgieva set out a series of measures to reduce global inflation and public debt to sustainable levels and called for measures to remove “constraints on economic activity” and boost productivity.

“In short, if there are market failures that are being addressed, such as accelerating innovation to address the existential threat of climate change, then there is a case for government intervention, including through industrial policy,” she said.

“If there is no market failure, caution is needed,” she added.