Kristalina Georgieva (00:52):
Morning. This is why we are here. And okay, one more.
Julie Kozack (01:15):
All right. Good morning, everyone, and welcome to this IMF press briefing. I'm Julie Kozack, Director of the Communication Department. Thank you so very much for joining us this morning. And as usual, we are going to begin with some opening remarks from our managing director, Kristalina Georgieva, after which we will turn to your questions.
(01:41)
So, without further ado, Kristalina, over to you.
Kristalina Georgieva (01:43):
Thank you, Julie, and a very warm welcome to all the journalists who got up early to be with us on this beautiful Thursday morning. And also to those who are online, great to have you with us. As you saw earlier this week, in our latest world economic outlook, we have significantly downgraded our projections for global growth. Major trade policy shifts have spiked uncertainty off the charts accompanied by tighter financial conditions and higher market volatility.
(02:29)
Simply put, the world economy is facing a new and major test, and it faces it with policy buffers depleted by the shocks of recent years. That puts countries in a difficult position. It also creates urgency for action to strengthen the economies for a world of rapid change.
(02:58)
Today I want to zoom in on how countries can actually do it. This is the main question we are getting from our members in every single meeting I have had this week.
(03:13)
In my global policy agenda, let me, for the audience, remind you that it is a very nicely crafted document this year, in parentheses this year, we have added very informative charts. And I hope you would look into those as well.
(03:34)
In it, we focus on both the immediate challenges and our medium-term directions. I emphasize three overarching priorities, first and most urgent, for countries to work constructively to resolve trade tensions as swiftly as possible, preserving openness and removing uncertainty. A trade policy settlement among the main players is essential, and we are urging them to do it swiftly because uncertainty is very costly.
(04:19)
I cannot stress this strongly enough. Without certainty, businesses do not invest, households prefer to save rather than to spend, and this further weakens prospects for already weakened growth.
(04:37)
Countries also need to address the imbalances that fuel many of the tensions we see. Among major economies, some countries like China, need to act to boost private consumption and embrace a shift to services.
(04:53)
Others like the United States need to reduce fiscal deficits. And in Europe, it is time to complete the single market, banking union, Capital Market Union, removing internal barriers to intra-EU trade. Get it done. All countries should seize this moment to lower their trade barriers, both tariff and non-tariff.
(05:24)
Second overarching priority. Countries must act to safeguard economic and financial stability. The best way to do that is to get their own house in order. On fiscal policy most countries need to rebuild buffers and ensure that sustainability, although some may see shocks that warrant temporary and targeted fiscal support.
(05:57)
We urge countries to define credible adjustment paths. Gradual in most cases, protecting key investments, maximizing spending efficiency, and making space for longer-term needs. Trade-offs would be tough for all, but they would be toughest for low-income countries which face both tight financial conditions and global growth slowdown and falling aid flows.
(06:35)
To help ease the trade-offs there, domestic resource mobilization must be part of the mix. We cannot have countries with tax-to-GDP below 15%, where it is difficult to sustain the functioning of the state.
(06:53)
For central banks, the times when countries marched in lockstep is over. Different countries will face different conditions. Inflation pressures in some countries are easing. In others pressures, are yet to abate. What is our advice? Watch the data. Watch inflation expectations. Central banks will need to strike a delicate balance between supporting growth and containing inflation.
(07:28)
To do so, they must not only adjust policy interest rates, but also rely on credibility to anchor expectations. Central bank independence is critical for credibility. Protect it.
(07:47)
Open economies, including many emerging markets, are exposed to the trade shocks and tighter financial conditions. They must preserve exchange rate flexibility as a shock absorber. In the event of unwarranted currency market volatility, these countries can find policy guidance in the IMF's integrated policy framework.
(08:12)
My third and final overarching priority, double down on growth-oriented reforms to lift productivity. Even before the latest shock, we were living in a low-growth, high-debt world, sounding the alarm on weak medium-term growth for quite some time. You heard me saying that many times.
(08:40)
Now is the time for long-needed but often delayed reforms that can create a good business environment, put entrepreneurship in the front seat, reform labor markets, create conditions for innovation, and in a world of rapid technological advancements, give countries a chance to catch the benefits of these advancements for their people.
(09:15)
The IMF, of course, as always, we would be there for our members. We are focusing on what we do best, helping them secure economic and financial stability, resolve, or even better, prevent balance of payment problems, and put in place strong policies and institutions to underpin vibrant economies. We will help countries with surveillance, with diagnostics, with policy advice, and when necessary by providing financial support.
(09:51)
As part of crisis resolution, we must ensure that the global financial safety net is strong. We will look for ways to further strengthen our collaboration with regional financing arrangements and with swap providing measure central banks. When we have a cohesive, effective, and efficient global financial safety net, this will deliver confidence to our members in this more shock-prone world. We will continue to foster cooperative policy solutions for promoting a healthy rebalancing of the world economy, to helping countries address that vulnerabilities.
(10:38)
And here I want to acknowledge the important work of the Global Sovereign Debt Roundtable. This week we agreed to publish a playbook that provides guidance for predictable and faster debt restructuring processes. And I was very pleased to see support of all traditional, non-traditional creditors, private sector, and debtor countries to have that predictability.
(11:13)
Finally, we will reiterate the need for continued cooperation in a multi-polar world. The shared objective for all must be a better balanced and more resilient world economy.
(11:29)
Before I wrap it up, I want to recognize Secretary Bessent's remarks yesterday in which he laid out the US administration's vision for the Bretton Woods Institutions. The United States is our largest shareholder, and even more. The United States is the home of my colleagues and me.
(11:54)
So, of course, we greatly value the voice of the United States. I very much appreciate Secretary Bessent's reiteration of the US commitment to the fund and to its role. He raised a number of important issues and priorities for the institution that I look forward to discussing with the US authorities and the membership as a whole. We will have opportunities to do so here, and we will also have opportunities to continue with our executive board as we carry out important policy reviews.
(12:31)
The comprehensive surveillance review, it will set our surveillance priorities for the next five years, and the review of program design and conditionality, which will carefully consider how our lending can best help countries address the low growth challenge and durably, durably, resolve balance of payment weaknesses.
(12:54)
So, we have a way to go. And we are laser focused
Kristalina Georgieva (13:04):
Are there cyclists in this room, people who bike, bikers? Okay. As bikers would say, [foreign language 00:13:13], step on the pedal. And with that, I'm very happy to take your questions.
Julie Kozack (13:20):
Okay. Thank you very much Kristalina. We'll now turn to your questions. I see you have hands up already. Very good. Please just give your name and outlet when called on. I'm going to start right here, woman right in the front row here.
Claire Jones (13:41):
Claire Jones, Financial Times. Thanks very much for the opportunity to put a question to you. You mentioned Secretary Bessent's remarks yesterday. He accused the IMF and the World Bank of mission creep, and specifically the IMF on mission creep in areas such as climate change, gender policies, and also social issues. Do you think there's a role in the future for the IMF in areas such as climate, gender, and social issues? Thanks a lot.
Kristalina Georgieva (14:12):
Thank you for your question. So what do we do here? We concentrate on macroeconomic and financial stability for growth and employment. We have 191 members. They face different challenges. They face different types of risks to their balance of payment. And what we do is to analyze what are these risks and what the fund in our mandate, in what we do. On the fiscal side, on the monetary policy side, on the financial sector side, what can we do to help them be more resilient to shocks? So when we have, for example, Caribbean countries that are wiped out by extreme weather events regularly, naturally, they're very concerned about that, and they say, how can we be more resilient to these shocks? And again, we focus on balance of payment. What are the risks, and what can be done to protect balance of payment in these countries. And I want to say that I actually agree with the secretary on one thing. It's a very complicated world, a world of massive challenges of all kinds. We are a small institution. We are 4,000 people, not very well known, but very fiscally disciplined institution.
(15:46)
Our budget today, in real terms, is what it was 20 years ago. So yes, we have to focus, and that is exactly why we engage with the membership so we can make best use of the staff of the fund.
Julie Kozack (16:05):
Okay, thank you.
Kristalina Georgieva (16:06):
I really like to run a tight ship, so yep.
Julie Kozack (16:11):
I can attest to that. Let's go here. Gentleman, third row, blue shirt.
David Lawder (16:25):
Hi, thanks. Managing Director David Lawder with Reuters here in Washington. Just to follow up on Claire's question, does Secretary Bessent's prescriptions here for the fund, will it cause you to rethink some of the lending programs like the RSF and the RST? And then secondly, a lot of the economists in the private sector have a more pessimistic view. Especially when you look at the prospects for U.S. recession, you're not predicting that. Some of the ministers here that we've been interviewing feel the fund is being too conservative. Can you just explain the differences between yourselves and the private sector? Thanks.
Kristalina Georgieva (17:11):
Thank you. Thank you very much. Actually, in the paper that I just flagged to you, we have a slide that shows fund lending, and you need a magnifying glass to see the share of the resilience and sustainability trust in this lending. It's really small. But as I was explaining in the answer to the previous question, for countries that are highly vulnerable to extreme weather events, having policy advice strictly on the macro side… There is a bit of confusion. People think that we have climate experts. We don't. That's not our job. Our job is to say, okay, if you are Dominica and a hurricane can wipe out the equivalent of 200% of your GDP, what are reasonable policy to put in place. Or to be more specific here, because we have a program with Barbados, if you are Barbados and natural disasters are highly damaging to your economy, what are the policy measures you can put in place. In the case of Barbados, we came up with creating an additional buffer for them that would actually prevent a balance of payment shock from derailing the economic development of the country.
(18:50)
So, of course, we are a membership institution, David. What our members decide, this is what we do, and we periodically review all our instruments. At this point, we have the function of the fund on [inaudible 00:19:10] of payment support defined with a number of instruments being deployed. To your second question, so I'm going to do this as illustration, David. My glass, when you look at it, it is more than 60% full. Well, this is where we are. This is what it is. How can I call it empty? I can't. When we look at the data, what we see is that for the United States, recession risks have increased, now to 37%, but we are not yet… We don't see, either in the labor market or in indicators for the functioning of the economy, such a dramatic block of economic activities that will drag growth in the United States all the way to below zero. So as you remember, this is something that people may not appreciate enough, our earlier projections for a very vibrant U.S. economy were for 2.7% growth for this year.
(20:38)
We have downgraded the United States, actually, this is the largest of our downgrades, by 0.9% to 1.8% for this year. But we see enough that carries the United States forward. And, of course, we recognize that there is work underway to resolve trade disputes and reduce uncertainty. I want to repeat my message. Uncertainty is really bad for business. So the sooner there is this cloud that is hanging over our heads is lifted, the better for prospects for growth. For the world economy, as you know, you saw it in the wheel, we are also projecting an increase in recession risk from 17 to 30%, but, again, very… And by the way, there, we talk about growth falling below 2%, not below zero. So there is a lot that is carrying the world economy. Actually, the real economy is functioning in a way that we are seeing no predominant risk.
(22:01)
Is there a risk? Yes, but it is in our, we used to say, downside scenario, and not in what is the scenario we anchor our projections. This being said… And I'm sorry I'm dwelling on that, but it's a very important question. And David, I get it from delegations, when we talk about our projections, a lot. This being said, countries can… They're not passive observers. They can act. And one thing that is amazing in these meetings is how much that sense of urgency to act is penetrating our membership. And I do hope that ministers would go back and say, "Okay, tough reform. I have postponed it. Postpone no more."
Julie Kozack (23:06):
All right, very good. We're going to go to this side of the room. I'm going to go all the way to the end. There's a woman, third row, at the very end in the brown suit.
Xiaozhou (23:18):
Thank you so much for taking my question. I'm Xiaozhou from CCTV and CGTN. So my question is, many emerging markets, particularly in Asia, are feeling the pinch of escalating trade tension and global uncertainties. So from the IMF's perspective, how have China and ASEAN countries have been affected so far? And is there any policy recommendations in the near term that are available from the IMF to navigate these countries through this? Thank you.
Kristalina Georgieva (23:53):
Thank you. Thank you for your question. Indeed, Asia is a continent that is quite significantly impacted because economies that rely a lot on export, when tariffs are announced, feel the pinch more. When we look at China, we have downgraded growth projections for China from 4.6 to 4%. We would've downgraded it much more. We actually would've had not 0.6, but 1.3% downgrade if it wasn't for the policy accommodation that China is already putting in place. It helps.
(24:45)
And that is the first piece of advice. If you have policy space, now is a good time to use it. With regard to China, we are emphasizing four points. First, rebalance your economy towards domestic consumption more. Second, to help with this, bring to an end the thermal in the property sector and, of course, add social protection for people so they don't feel compelled to save rather than spend. Third, lift up services, a warm embrace from healthcare to education to basically the service sector vis-à-vis the goods consumption. And four, and the fourth is very important, get the government to pull back from too much intervention in the economy. Let the private sector
Kristalina Georgieva (26:01):
… function to its full capacity.
(26:06)
We are currently working on a paper, and that is in consultation, collaboration with the Chinese authorities, to document in details what are the ways in which the government may be supporting businesses and by doing so shifting the competitive position of these businesses. And this will be one of our contributions to China.
(26:35)
I am particularly concerned about ASEAN. Why? Because ASEAN, very open economies. They find themselves in a very tough spot with announced tariffs quite significant across the board in ASEAN countries. ASEAN has done really well to build resilience over the last years. Their growth has been quite sound. They have prudently brought inflation down. They have disciplined fiscal policy. It helps. This is our number one advice to ASEAN. You have some policy space in monetary policy, in fiscal policy. Carefully and prudently use it, of course, being mindful that if you deplete it entirely and there is another shock, that would be a problem.
(27:41)
We have been working with ASEAN on their external sector, especially forex. We have integrated policy framework. It allows good thinking around how to apply the exchange rate flexibility, how to look at this from the perspective of sudden exogenous shock.
(28:14)
I am very pleased to see that ASEAN is doing something that other regions are doing, strengthening economic cooperation, policy coordination, and intra-ASEAN trade. Currently the ASEAN countries trade only 21% among themselves. Well, they sure can go up.
(28:39)
And I think that we will see not only in ASEAN, we will see it in other places, Gulf Cooperation Council, Central Asia, the African continent with the Continental Free Trade Agreement, more being done to compensate. If global trade is going down, then regional trade can be a compensator and actually inject growth energy.
(29:10)
I want to finish by saying that ASEAN has been remarkably prudent over the last years to build resilience. And that puts them in a good position to have the reputation to deploy their policy space if needed.
Julie Kozack (29:32):
Okay. I'm going to stay on this side of the room. I'll go to the gentleman in the second row with the red tie.
Rotus Oddiri (29:36):
Rotus Oddiri with Arise News. You mentioned these present tensions could disproportionately impact low-income countries, and I'm glad you mentioned the African Continental Free Trade Area Agreement because my question is on Africa. You met with the Nigerian delegation earlier this week. What is the strategy or your advice for the African continent? As you've noted in the past, Africa is not a country. It's a continent. Egypt cut rates for the first time in five years seven days ago. Prior to that, Ghana hiked its interest rate for the first time in almost three years. At these tough times, what's your advice for the continent?
Kristalina Georgieva (30:14):
Well, we have seen over the last years the African continent having some of the fastest growing economies. But we also have seen low-income countries primarily, and among them fragile conflict affected countries, falling further behind. And now this is a shock for the continent. The direct impact of tariffs on most of Africa, not on all of Africa, but on most of Africa is relatively small, but the indirect impact is quite significant. Slowing global growth means that all other things equal, they will see a downgrade. And actually, we have downgraded growth prospects for the continent.
(31:12)
For the oil producers like Nigeria, falling oil prices creates additional pressure on their budgets. On the other hand, for the oil importers, this is a breath of fresh air. In other words, as you indicated in your question, different countries face different challenges. If I were to come with some basic recommendations that apply to Africa, I would say, and actually they apply to Nigeria, they apply to Egypt, they apply to Ghana, they apply to Coté d'Ivoire. First, continue on a path of strengthening your fundamentals. There is still a lot that can be done on the fiscal side to have strength. As I was talking about ASEAN, to have buffers for a moment of shock. And don't use any excuses around, "Oh, it's difficult. We cannot really go for more tax," because, yes, you can. There is a lot that can be done to broaden the tax base and a lot that can be done to reduce tax evasion and tax avoidance.
(32:34)
Using technology as some countries are doing to chase the tax dollar when there is the foundation for that is a very good thing to do.
(32:45)
Second, on the monetary policy side, we know more as I said in the opening, we are no more in a place when you can look at the book of the Central Bank Governor of the neighboring country and say, "Oh, they are doing this. I'll do the same," because you have to really assess domestically what are your inflationary pressures and do the right thing for your country.
(33:15)
But above all, make it so that the image of the whole continent changes because now everybody suffers from wrongdoing, from corruption or from conflict in one country. It throws a shadow on the rest of the continent.
(33:38)
And finally, like with ASEAN, deepen inter-regional trade and cooperation. Remove the obstacles to it. Sometimes there are infrastructure obstacles. The World Bank is working on reducing that infrastructure obstacle to growth and trade.
(33:58)
Africa has so much to offer the world. Obviously, they have the minerals, the natural disasters, the young population. I think a more unified, more collaborative continent can go a long, long way to be an economic powerhouse.
Julie Kozack (34:19):
Okay. I'll go to this side of the room. I'm going to have the woman in the red jacket, third row.
Paula Lugones (34:28):
Yeah. Good morning. Paula Lugones for Clarin, Argentina. Thank you. Ms. Georgieva, you have been very complementary of the economic reform that the Argentinian government is implementing. You have said that Argentina is an example of a country that has made great strides through structural reforms and fiscal discipline. I would like to ask you about the challenging faces that now the new program is facing right now, and above all what are the risks that Argentina can face in these times of global uncertainty? Thank you.
Kristalina Georgieva (35:12):
Argentina has demonstrated that this time it is different. This time there is decisiveness to put the economy on a soundtrack from high deficit to surplus, from double-digit inflation to inflation that in February dipped under 3%, from poverty over 50% to now around 37%. Still very high but going down.
(35:55)
The state is stepping out from where it doesn't belong to allow more dynamism in the private sector. Actually, if you are interested, today we will have the global debate, and Federico is going to be one of the speakers to talk about smart regulation, how you make the economy more vibrant by not being an obstacle to private initiative.
(36:28)
We saw that when the program was announced, the immediate impact on markets was positive because, among other things, you ask about risks. One risk for Argentina would be if it is alone in this macroeconomic stabilization. Now the country is not alone. We are there. The World Bank is there. The InterAmerican Development Bank is stepping up.
(36:54)
What are the risks? And I'm sorry, and there is a very important opportunity for Argentina in a world hungry for what Argentina produces, both in agriculture and in minerals, mining, gas, lithium. What are the risks?
(37:14)
First, external. A worsening global environment of all other things equal, it would impact Argentina negatively. Domestically the country is going to go to elections, as you know, in October. And it is very important that they don't derail the will for change. So far, we don't see that. We don't see that risk materializing, but I would urge Argentina, stay the course.
Julie Kozack (37:55):
All right. Let's go right here in the front, end of the first row.
Andy Curran (38:04):
Thank you very much. Andy Curran from Bloomberg News. Managing Director, we had a lot of news this week, for example, mixed signals on tariffs on China, commentary on the position of the Fed Chair, and of course now the US support of the IMF. How would you sum up the mood of the meetings among your members this week, please? Thank you.
Kristalina Georgieva (38:24):
The membership is anxious because we were just about to step on a road to more stability after multiple shocks. We were projecting 3.3% growth. And actually, we were worried that this is not strong enough. And here we are, growth prospects weakened. The membership is also recognizing, and I hear it time and again, that it is very important to have a
Kristalina Georgieva (39:00):
Rules-based global economy in which there is predictability of planning for action both for governments and for the private sector. I actually hear a lot of support from the membership for the fund because we have… Actually, the same way Argentina earned the fund to support it, we have earned the support of the members by being there for them. Where the expectations are for the outcome of the meetings is to get more consistency in how all countries are going to go about pursuing their interests, which is legitimate. Of course every country has to think about its own people, but doing it so in a way that enlarges the global pie doesn't shrink it.
Julie Kozack (40:08):
All right, very good. We have time for one last question. I'm going to go over here and-
Kristalina Georgieva (40:13):
And I'm sorry. And what I would say is the worry I hear more often is actually not even the tariffs, it is uncertainty. Let's have clarity and that is why we are so… With my apologies to the audience, we are so repetitive saying we need to bring uncertainty down.
Julie Kozack (40:30):
We'll have time for one last question. I'm going to go to the front row. Yeah, right here. Woman in the burgundy suit.
Speaker 1 (40:39):
[inaudible 00:40:39] from [inaudible 00:40:40] Bloomberg. Thank you, Madam Georgieva for taking our question. I wanted to ask you about the MENA region. How concerned are you with all of this turmoil around the dollar and its effect on the MENA region, especially that many countries, there are exporters of intermediate goods that go into major industries and many of them are exporters of energy and what's happening to the dollar is definitely of effect. And you have mentioned uncertainty many times today in this press conference. So this uncertainty, how will it affect the countries in our region that are trying to get out of a lot of geopolitical uncertainty with the help of the IMF in special programs such as Egypt? So will this make the IMF revisit some of those programs amid all of this turmoil? Thank you.
Kristalina Georgieva (41:32):
Thank you very much. The MENA region actually got quite a downgrade. It is still doing better this year than last year, but we were projecting that growth would go to 4% and now we downgraded it to 2.6. A little bit like Africa, most of the impact is indirect. While countries in the MENA region of course trade with United States, but most of them don't have very high exposure and where it bites is slowing down of the global economy. And MENA has many oil exporters, price of oil going down. I mean, the dollar has… Historically, it goes up, it goes down. It is not a new thing. So if you are oil exporter and you export… Get your revenues in dollars, when the dollar weakens, that creates a bit of a problem for your fiscal position. But if you are an oil exporter, this is a gift because then you can deal more easily with the challenges you face.
(43:07)
My take for the MENA region is very diverse region like the African continent, you have the Gulf Coordination Council. I have a lot of praise to offer because they have been pursuing reforms and diversification of the economies. Most countries have done really well, so now they see oil growth down. But no economy is still doing quite well. We have the more kind of middle income countries that are faced with difficulties impacted by regional conflicts like Jordan, like Egypt. And there we have been engaged, we have been providing support as you know. We have countries like Morocco that have done really well to get their house in order to have sound fiscal monetary policy and the only country in the region that is eligible for flexible credit line from the IMF. And then we have countries like Sudan or Syria that are severely impacted by conflicts.
(44:38)
I was very, very pleased that the attention of our membership, despite difficulties at home across the board on low-income country countries and conflict affected states has sharpened. There is a recognition that what happens there impacts the rest of the world. We had a Syria meeting during this week meetings. First time in more than 20 years, Central Bank governor and minister of finance from Syria are here at the meetings. Our intention is to first and foremost help them rebuild institutions so they can plug themselves in the world economy. You're asking me whether we are revisiting program assumptions? Of course, we would be carefully watching what is happening. And then I had a meeting with the prime minister of Jordan and we are not talking about amending the program for Jordan right now, but we are talking about the importance of the fund as an anchor of stability and how we can exercise this role.
Julie Kozack (45:55):
Thank you very much, managing director and thank you very much to all of our journalists who've joined us today. I'm bringing this press conference to an end. As always, the transcripts will be made available on our website and I want to wish all of you a very wonderful rest of your day. Thank you very much.
Kristalina Georgieva (46:15):
Thank you very much, everybody.
