Positively, quicker deflation may result in additional financial constraints being eased.

“Looser fiscal policy than is required and projected in the predictions may result in faster growth in the short term, but at the expense of a more expensive adjustment down the road.

“On the down side, tight monetary conditions may be prolonged by fresh commodity price surges brought on by geopolitical shocks, such as ongoing attacks in the Red Sea, supply interruptions, or more persistent underlying inflation.

Growth disappointments could also result from a disruptive shift to tax hikes and spending cuts, as well as from China’s worsening property market problems.

According to the research, managing the last decline of inflation to target and adjusting monetary policy in response to underlying inflation dynamics would be policymakers’ short-term challenge.

“At the same time, a renewed focus on fiscal consolidation is essential to restore budgetary capacity to deal with future shocks, as many economies are better equipped to withstand the consequences of fiscal tightening and inflation is dropping.

In order to address the growing public debt and fund new expenditure objectives, money must also be raised.

Targeted and methodically implemented structural changes would hasten the convergence of income levels while bolstering productivity growth and debt sustainability.

“Among other things, debt settlement, avoiding financial distress, making room for essential investments, and mitigating the effects of climate change all require more effective multilateral coordination.”