- 16 minutes ago
Category
🗞
NewsTranscript
00:00All right, well, let's hope they're still clapping at the end.
00:03Cristalina, we want to talk a little bit about kind of the global world order,
00:06whether we're taking it for granted.
00:08I mean, we think about a lot of the short-term risks that have arisen as of late
00:14that now seem to become a more structural risk.
00:16And earlier this year, you told the world to sort of think the unthinkable.
00:20Where do we stand right now?
00:22Are governments thinking hard enough?
00:23Well, where we stand is, one, the world economy has proven to be more resilient than many feared.
00:35Two, the forces that define where it is headed remain strong and pushing in opposite directions.
00:48We have a negative energy supply shock.
00:53It is holding us back.
00:55And we have a positive AI investment demand shock that is lifting the economy up.
01:04Three, what we have seen is remarkable action when necessary.
01:12And that is what I am more optimistic about.
01:16We have seen emerging markets developing economies over the last decades,
01:24building strong institutions, including in the Gulf.
01:29We have seen a remarkable fast action when necessary to counter the energy supply shock.
01:41And while there is a lot of talk about a fragmented world and indeed it is less unified,
01:51it is still a world in which we are interdependent and we cooperate.
01:57So this is what I see.
02:02More optimism, but also we have to be careful and cautious.
02:09The risks are high and uncertainty is the new normal.
02:15Well, as that uncertainty prolongs itself, does that make it harder to manage?
02:19You talk about resiliency.
02:20We're looking at 3% global GDP growth.
02:23That's phenomenal, but that's down from your previous forecast earlier in the year.
02:28They've been revised down twice and you have another forecast coming up in mid-October
02:32that I'm going to assume, correct me if I'm wrong, would probably also have to be revised down.
02:38Well, we have been revising up and down, up and down,
02:41exactly because of this uncertainty within which we operate.
02:46Having growth that would be hovering around 3% is a massive achievement,
02:53given all the shocks we have been experiencing.
02:59And yes, we will be providing new projections.
03:02They would be reflecting the fact that risks do remain high.
03:08And let me just highlight three.
03:12First, inflation is stubborn.
03:17We are not anticipating a quick resolution.
03:23And that means that many central banks have to tighten.
03:28We have seen action in Europe.
03:30We have seen action in the United States.
03:33More may be necessary.
03:36Well, when you fight deflation, and rightly so, to secure price stability,
03:43what it does is it increases the cost of debt service.
03:48And this is the second problem.
03:50Debt has been high.
03:52And when interest rates climb up, debt service becomes so much more difficult.
04:01And I want to say clearly to everybody that we have been warning
04:07that fiscal consolidation must take place.
04:12And we are seeing a lot of understanding, but not enough action.
04:19And three, we have been quite enthusiastic everywhere about AI.
04:26AI, but AI also brings with itself potentially risks.
04:34And I want to remind the audience that is the Amaris law.
04:38We always overestimate the positive impact of new technology in the short run.
04:47We underestimate it in the long run.
04:49What does it mean?
04:51It means that risks are front-loaded, financial stability risks if AI disappoints.
04:58Because we have these high expectations, if they don't materialize,
05:03disappointment may lead to potentially to a shock to the system.
05:08There is a lot of leverage around AI.
05:11There is a lot of circular financing.
05:14And that is something that we have to be mindful of.
05:17Does that circular financing and some of the issues surrounding it,
05:20does that appear to you as a growing financial stability risk?
05:25Or is that something you see?
05:25It does.
05:26It does.
05:26It does.
05:27Because what it tells us is that should there be a loss of confidence,
05:37then it is very – you have this loop that you cannot easily handle.
05:43And we are seeing quite a lot of debt financing
05:47and quite a lot of interface, interdependence when it comes to financing AI.
05:53Whose problem is that, though?
05:55Is that primarily a U.S. problem, a European problem,
05:58or is that a global problem that smaller countries will have to bear?
06:01It is primarily concentrated in the U.S.,
06:05but there are two things we need to pay attention to.
06:08One, the supply chain of AI includes many other players.
06:15You look at countries in Asia like Malaysia, Thailand, Korea, Singapore.
06:24They are integrated in the AI value chain.
06:28And actually, Korea is one of the countries where the risk of financial impact,
06:37should there be disappointment, is quite visible in the way the stock market in Korea
06:45has been going rapidly up and down.
06:48And, of course, we see other parts.
06:52In Europe, you have a critical production in the Netherlands within the AI value chain.
06:59So that concentration in the U.S. doesn't mean that it is a problem that is only –
07:07or an opportunity combined with a problem only concentrated in the U.S.
07:12This does get to the idea, though, of who is actually bearing the burden for a lot of these risks.
07:17And let's just talk about the energy situation.
07:19There have been a lot of moves, including by the Saudis and the UAE,
07:23to find alternative routes around the Strait of Hormuz.
07:26You've had nations like Nigeria, India, other emerging market nations step up their refining capabilities.
07:32Does this signal a greater shift structurally where non-U.S., non-China, the non-major nations
07:41are the ones who take on that burden and maybe even take it on successfully?
07:44So this is one of the beautiful stories that should be talked about more.
07:51How did we manage to sustain a massive energy shock by actions in multiple places?
08:04We should be grateful to Nigeria and to India for expanding refinery capacity very quickly,
08:12to the U.S. and Norway for increasing production very quickly,
08:17to Saudi, to the Saudis, to the UAE, for bringing alternative routes to the Europeans
08:27for their renewable energy that is now helping us to sustain the shock,
08:32and to everybody everywhere for reacting to price signals.
08:38What we have seen is reduction in energy intensity that is complementing all these other efforts,
08:46and this is how we sustain the shock.
08:50Whether when we look into the future, of course that focus on alternative routes
08:56is going to be quite significant,
08:59but the story is not only an entirely that positive story of resilience.
09:08Bring back AI.
09:10Well, AI demands energy on a massive scale.
09:16We just looked into the likely impact of AI on energy consumption.
09:23Even in Europe, where AI is somewhat less pronounced as it is in the United States,
09:32it is already consuming 3% of energy,
09:35but by the end of this decade, it will become three times higher.
09:39So we have to recognize that the question of energy security
09:46is not just a question in the context of disruptions of energy supplies from the Gulf.
09:53It is a question of the future of our economy,
09:57an economy that is likely to be so much influenced by AI.
10:04Well, when we talk about the resilience of the global economy,
10:08if the AI story wasn't there, or it was even the growth was somehow just stopped,
10:14does that mean that buffer is gone?
10:18When we look at the buffers in the world economy,
10:24where do they come from?
10:27Well, number one, they come from prudent macro policies.
10:32We did a study of emerging markets that was quite impressive.
10:39Emerging markets today have the same or better monetary policy
10:45than advanced economies.
10:47And on the fiscal front, many of them are showing more prudence
10:52than advanced economies where debt levels have jumped.
10:56Since we are here at the Qatar Forum, I want to say bravo to Qatar.
11:03Qatar, during good times, built buffers.
11:07This is protecting the economy today.
11:11And I think what we learned from prior shocks,
11:19a crisis usually forces you to do things that you might avoid doing otherwise.
11:27Well, I mean, the IMF and the World Bank,
11:29a lot of the international system deserves some credit
11:31for nudging a lot of the developing nations in that direction.
11:34Do you have the power to maybe nudge the United States,
11:38which seems to be moving in the opposite direction?
11:41We have been advocating with the United States
11:45to pay attention to the fiscal position.
11:49As we all know, deficit has gone up.
11:53Debt levels have climbed to over $40 trillion.
12:00And I know, out of conversations with Secretary Besant,
12:05that there is an understanding that this is not sustainable,
12:09that the U.S. has to gradually bring deficits and debt down.
12:14The philosophy adopted is we are going to grow out of it.
12:19And it is true.
12:20The best way to deal with debt,
12:24there are two ways to deal with debt.
12:26First, don't have it in the first place.
12:29But if you have it,
12:31it is true that strong growth helps to increase fiscal revenues
12:36and then bring public debt down.
12:40We have been quite impressed how much this issue of debt
12:48is now surfacing as a priority everywhere.
12:53Debt in advanced economies is high.
12:57Debt in some of the low-income countries
13:00that have the highest difficulty to deal with it is high.
13:07There is a lot of conversation about debt of low-income countries.
13:12We do agree that we should be relentless
13:18in helping low-income countries to grow.
13:22But also, if debt is unsustainable,
13:26to have the support of the international community
13:30to restructure it.
13:32Right now, we are in discussions on Senegal.
13:36And I am optimistic that we would get fast action on Senegal.
13:42But is the world connected enough on that?
13:43I mean, just take the common framework, for example.
13:46We have seen a lot of slow walking
13:48by at least one of the big members of that group,
13:51primarily because they have a vested interest
13:52in making sure that maybe they get paid whole
13:54rather than just the IMF and World Bank.
13:56What we have seen over the history of the G20 common framework
14:03is that engagement of public-private sector creditors
14:10with the debt of the countries
14:12leads to a better performance of the framework.
14:16We created, together with the World Bank and the G20,
14:21at that time it was the Indian presidency,
14:24Global Sovereign Debt Roundtable.
14:27This is space where traditional creditors,
14:30new creditors, private sector and debtors
14:34can discuss practically what has been the experience so far,
14:41what works, what doesn't work, how to fix it.
14:44We came up with a playbook for debt restructuring
14:49that is adopted by everybody.
14:51It is not mandatory,
14:54but we are watching like hoax with the bank
15:00that it is applied.
15:01And the reason I'm saying I remain,
15:03I'm more optimistic about Senegal,
15:06this is the first case to apply the playbook.
15:09And I told all the creditors,
15:11I was at the G20 and I had the chance to tell them all,
15:16look, now is our chance to prove
15:19that lessons are learned and applied.
15:23Let's just real quickly,
15:24are you optimistic about Argentina?
15:25I know your team is scheduled to be there tomorrow
15:27for the next round of talks.
15:28Well, Argentina has done the most difficult thing
15:32a country should do when debt is very high
15:36and inflation is very high.
15:38They have focused on macro-stability.
15:42They brought their economy in a very good place
15:46from deficit to surplus and inflation down.
15:51Now that macro-economic stability
15:54has to translate into growth and employment.
15:58Macro-stability on its own,
16:00good but not good enough.
16:02So this is a critical time for the Argentine economy
16:06to demonstrate that the objectives of growth and jobs,
16:14better opportunities for the people of Argentina,
16:17can and will be met.
16:20We're almost out of time.
16:21I just want to get your thoughts real quickly
16:23on the next meetings in Bangkok
16:24and what you want to actually see come out of that
16:28that would actually be actionable.
16:29What makes that more than just a discussion?
16:31Well, we would be meeting at this time
16:34of exceptional uncertainty.
16:36And the very value of being in the same place,
16:39having candid conversations around where the economy is,
16:42where it is headed,
16:43what needs to be done,
16:44is tremendously important.
16:46What I want to see coming out of Bangkok
16:49is this question of bringing debt levels down,
16:55achieving these two objectives at the same time,
17:00price stability, keep inflation, bring inflation down,
17:04and fiscal sustainability, bring debt levels down.
17:08That we would come out of Bangkok with determination,
17:12that we would walk our talk on price stability
17:17and on fiscal stability.
17:19If we do that, if we go back home,
17:23recognizing the tremendous significance of action,
17:30especially on the fiscal side,
17:33I think it would be time really well spent.
17:36And, of course, we are in Bangkok for a second time.
17:40East Asia went through the East Asia crisis.
17:44I really want to be there to show that we, the fund,
17:49it's not your grandmother's IMF anymore,
17:51that we have learned our lessons.
17:54All right.
17:54Well, that's a great place to end it.
17:55Thank you very much, Managing Director.
Comments