Transcript

Participants:

Kenneth ROGOFF, Economic Counselor and Director of the Research Department, IMF

David ROBINSON, Senior Advisor, Research Department, IMF

Tamim BAYOUMI, Division Chief, World Economic Studies Division, Research Department, IMF

Graham HACCHE, Deputy Director, External Relations Department, IMF

Proceedings:

Graham Hacche

MR. HACCHE: Good morning and welcome to this live press briefing on the IMF's latest report on the World Economic Outlook. For the first time we are broadcasting this briefing live in audio on our external website, so we would like particularly to welcome our website listeners around the world.

I am Graham Hacche, Deputy Director of External Relations at the IMF, and to my right I would like to introduce Kenneth Rogoff, who joined the IMF recently as Economic Counsellor and Director of the Research Department. This WEO has been put together under his general direction.

To Ken's right is David Robinson, Senior Adviser in the Research Department, who directs the World Economic Outlook project, and to David's right is Tam Bayoumi, Chief of the World Economic Studies Division.

Before turning to Mr. Rogoff for his opening remarks, I need to announce that this Friday morning at 9:30, Tom Dawson will be holding one of his regular press briefings at IMF headquarters, so that will provide an opportunity for you to raise questions not related to our subject this morning.

Ken?

Kenneth Rogoff

MR. ROGOFF: In my new role as the IMF's Chief Economist, this is my first turn in presenting the World Economic Outlook. The man I replaced, Michael Mussa, served in this role as a stellar economic analyst and a prescient forecaster of the global economy. The WEO's record is an enviable one, and I can only hope to maintain it over the coming years.

I'm fortunate in this regard that Mr. Mussa as left behind a superb research team in the Research Department at the International Monetary Fund, not least Mr. Robinson and Mr. Bayoumi to my right, and that in producing this document, we regularly enjoy the superb cooperation and support of everyone else at the Fund.

Harvard professors who come to Washington are not noted for their humility. But, in light of the significant economic and non-economic uncertainty facing the world economy at this conjuncture, perhaps more than the usual amount of humility is called for in presenting an assessment of the global economy today.

Since the IMF's last World Economic Outlook in April, prospects for the global economy have continued to weaken. Our latest round of quantitative projections presented in the new WEO we are publishing today were completed before the tragic events of September 11th.

Now, the implications of the terrorist attack clearly go well beyond the economic sphere. But it has to be recognized that it took place at a difficult time for the global economy. The WEO projections were already showing slowdowns in virtually every region in the world. However, given the strong macroeconomic policy response and normal resumption of growth in the world economy, and given the gradual abatement of the earlier oil price shock, the projections in the WEO do envision a gradual recovery toward the end of the year.

A central question, of course, is how these projections have to be reinterpreted in light of September 11th and its aftermath. There is no doubt that the attack is having a negative effect now in many regions of the globe and that it has increased what were already significant downside risks to the short-term global economic outlook, including for emerging market economies.

However, it is important to put the current economic situation in perspective. While there are clearly substantial uncertainties about unfolding events, one should not overlook that the economic fundamentals in many countries and in many respects have improved in recent years, and from an economic perspective, this leaves the world somewhat less vulnerable than it otherwise might be.

These improvements, together with the aggressive response by central banks across the globe, should help reduce the risk of sustained reduction in consumer and business confidence, a key concern in the months ahead. In the remainder of my remarks, I will elaborate on these issues.

Even prior to September 11th, macroeconomic developments over the preceding six months already pointed to weaker growth in just about every region of the globe, both this year and next, than we had anticipated in April. Among other factors, this synchronized slowdown has reflected stronger than expected global linkages--these are discussed in Chapter 2 of the WEO--which have been particularly evident in Europe, the continued weakness in the IT sector, the deteriorating situation in Japan, and worsening financial conditions in emerging markets.

Consequently, our published global growth projection for 2001 has been marked down by a little over half a percent to 2.6 percent, with a similar reduction in the outlook for 2002.

How is this assessment changed by the attack? There has certainly been a substantial initial impact in financial markets, although experience suggests that financial markets can sometimes overreact to these events initially. Over the past two weeks, major stock indices in the U.S. and Europe have fallen 7 to 15 percent and in Japan by 5 percent. Many emerging stock markets have fared even worse, particularly in Latin America and in Asia.

There has also been a broad-based flight to quality reflected in a sharp rise in spreads for both high-yield and emerging market bonds. Oil prices, after rising immediately after the attacks, have fallen sharply to levels significantly below where they were on September 10th

Movements in the major currencies have been relatively moderate, with the U.S. dollar weakening only slightly against the euro and the yen.

I can only add my voice to those who have commended national regulators, financial authorities, and market participants for showing that the global financial system can continue to function smoothly, even under a difficult and totally unanticipated form of extreme duress. Monetary policy in the major economies has responded aggressively to support the global payment system and to strengthen confidence and activity.

The monetary authorities in the U.S., euro area, Japan, Switzerland, Canada, and the U.K. directly injected large amounts of liquidity. The Fed also entered into temporary swap arrangements with the ECB, the Bank of England, and the Bank of Canada to facilitate the functioning of financial markets and to provide liquidity in U.S. dollars.

In addition, the Fed moved to cut interest rates by 50 basis points last week, quickly followed by cuts of the same magnitude by the Bank of Canada and then the ECB and the Swiss National Bank. Subsequently, the Bank of England and the Bank of Japan also cut rates, as did monetary authorities in a number of other countries, including Denmark, Sweden, New Zealand, Hong Kong SAR and Korea. In the United States, additional fiscal appropriations for defense, reconstruction, and the airlines will also provide support to activity.

Abstracting from uncertainties surrounding the possibility of further conflict, what is the likely direct impact of the events of September 11th? Clearly, the attack has had a terrible toll in human lives. But if we look at the direct economic damage in relation to the overall size of the U.S. economy, it is still relatively moderate, even recognizing that some industries have been hard hit.

While it's difficult to find close parallels in history--and that is an understatement--the direct damage is much smaller than that resulting from the Kobe earthquake of 1995, which, as it turned out, had only a very limited impact on output growth in Japan. And this is discussed further in Chapter 1 of the WEO.

Now, of course, the potential indirect effects of the attacks on consumer sentiment and spending, on business confidence, and on risk aversion are likely to be significantly more important. These are much more difficult to assess--and I refer to my earlier remark about humility being required--and will depend importantly on how non-economic events evolve in the aftermath of the attack.

Focusing on the economic front, there are a number of reasons for cautious optimism.

First, there is now a sizable amount of policy stimulus in the pipeline in most major economies, even more than we had anticipated a few weeks ago.

Second, economic fundamentals across the globe are considerably stronger than they were a few years ago, reflected in lower inflation, stronger fiscal positions, more flexible exchange rate regimes, and lower external vulnerabilities in emerging markets.

And, third, the terrorist attack should not substantially affect underlying productivity growth in the United States economy on which economic prosperity ultimately depends. And here I refer you to Chapter 3 on the discussion of the IT revolution in the WEO.

With the situation remaining fluid, it is premature, to say the least, to try and quantify the implications of the attack for growth in the United States and elsewhere. There will clearly be a short-term effect on activity, particularly in the last part of this year, both in the United States and in other countries. However, there is still a reasonable prospect that a recovery will begin in the first half of next year.

In terms of the projections in the WEO, the effect on projected global growth in 2001 is likely to be moderate since developments in the third and fourth quarter of the year have a limited impact on the average growth rate for the year as a whole. In 2002, however, global growth is likely to be rather lower than the 3.5 percent presently projected.

In sum, the downside risks identified in the main text of this World Economic Outlook have now increased, even if the economic channels discussed in the WEO are largely the same. The task for policymakers has become correspondingly more challenging, both in advanced and in developing countries. The basic requirements, however, remain though set out in the published WEO, and I'd like to highlight just three points.

First, the aggressive monetary response following the attack has been appropriate, and there remains room for maneuver to varying extents if additional action proves to be needed. In particular, there remains room for more aggressive monetary easing in Japan, even following the welcome steps last week.

On the fiscal side, the automatic stabilizers should be allowed to operate. Beyond that, it is probably best to wait a little to see how events develop. Frantic, ill-focused actions to stimulate the economy risk being counter-productive.

Given the uncertainties in the United States, other countries--notably in Europe and Japan--will have to rely more on internally generated growth. This makes it even more important to press ahead for structural reforms, again, discussed in the WEO. The weaker global outlook has clearly added to difficulties facing emerging market countries. With markets increasingly differentiating according to policy performance, the central requirement remains to stay the course of prudent macroeconomic policies and structural reforms.

Thank you.

MR. HACCHE: Thank you, Ken.

Turning to questions, then, can I ask you, please, in the usual way to identify yourselves by stating your name and affiliation. And please also wait for the microphone to be brought to you.

QUESTION: T.V. Parasuram from the Press Trust of India. You say on page 3, given the uncertainness of U.S. growth [inaudible] on internally generated reforms, the Prime Minister of India appears to think that internally generated reforms can take the growth forward to 8 to 10 percent. Do you think it's realistic to do that?

MR. ROGOFF: Well, having growth rates of 10 percent over sustained periods have not been witnessed very often in recent economic history, but having significant growth from reforms is certainly something we can be optimistic about.

MR. HACCHE: Next question, here please?

QUESTION: This is Umit Enginsoy with Turkey's NTV Television. Any estimates on how Turkey's already fragile economy would be affected in the aftermath of the terrorist attacks?

MR. ROGOFF: Well, in common with other developing countries and emerging markets, there is some stress, especially from the flight to quality that we're seeing in the bond market. But I think it's a bit early to assess the longer-term implications. We really need to adopt a wait-and-see attitude.

MR. HACCHE: The lady in the second row.

QUESTION: I'm Anna Willard from Reuters. Can you say exactly how much you expect U.S. growth this year and next year to be impacted by what happened on September 11th with a number?

MR. ROGOFF: I really think it is premature to try to quantify what's going to happen, especially in the United States, with the economic and non-economic uncertainties. It is clear that the United States economy will not emerge from its growth slowdown as quickly as one might have hoped.

I don't know if you want to comment on that further, David, or--

MR. ROBINSON: No, I think you've said [inaudible].

MR. HACCHE: The gentleman next--here, second row.

QUESTION: Ed Kean, Kiplinger. Mr. Rogoff, on page 5 of your statement here, you mention that there's varying extents on room to maneuver for monetary policy in the--I guess among the major industrial countries. Could you talk about the extent to which both the Federal Reserve and the European Central Bank have further room to maneuver, particularly in the U.S. where the federal funds rate is already pretty low? And could the Federal Reserve run the risk of starting to run out of bullets if it keeps cutting rates in 50-basis-point increments?

MR. ROGOFF: Well, I mean, we still have a ways to go before interest rates in the United States come down to zero level where you run into the kind of constraints that the Bank of Japan has faced. And the extent to which there's further room for maneuver clearly depends on how events unfold, that if the attack proves temporary on the economy showing signs of rebounding, there won't be a lot of room to maneuver, but there needn't be. And I suspect there won't be much reaction. So, but, still, inflation is low, interest rates are not yet at the zero bound, so, in principle, yes, there is still some room for maneuver if events take a marked turn for the worse.

QUESTION: [inaudible] Europe?

MR. ROGOFF: Europe has clearly somewhat more room for maneuver than the United States. On the other hand, they are facing a somewhat different circumstance. This attack most directly impacted on the United States, and I think we applaud the rate cut that Europe took last week. But I think we need to wait and see what's appropriate to do next. There's just a great deal of uncertainty, and I think judgments on these matters can change by the week.

MR. HACCHE: The gentleman here in the second row.

QUESTION: Ruben Barrera with the Mexican news agency Notimex. Mr. Rogoff, in the first chapter of the WEO, when you talk about Mexico, you point that the early passage of the fiscal reform is critical for Mexico in order to reduce medium-term fiscal vulnerable--risk. My question is: What do you foresee in case that this--the approval of this fiscal reform is delayed? And, also, if, you know, an eventual delay in the approval of the fiscal reforms could have an impact on the projection that you made for Mexico for the next year, you're pointing that Mexico--the GDP could grow by 4 percent next year. So I wonder if a delay in this matter could have an impact on those projections?

MR. ROGOFF: I think you're asking a somewhat rhetorical question that, of course, economic policy matters and it could have an effect, and Mexico borders the United States, so what's happening in the United States economy is significant.

David, did you want to add anything?

David Robinson

MR. ROBINSON: Just to make a couple of points.

As Ken said, obviously the main vulnerability in the Mexican situation is indeed developments in the United States, and that's the main reason why the Mexican economy has slowed down so much in the first part of this year.

On the fiscal side, I think Mexico, like a number of other countries in Latin America, does have the need to continue fiscal consolidation, although Mexico's vulnerabilities I think are rather less than elsewhere. And the tax reform is an important part of that.

I think we're confident that this reform is going to move ahead, and certainly the authorities have stressed on many occasions, most recently at the Article IV we had with Mexico only a month or two ago, that they are determined to meet their fiscal targets, both this year and to continue that in the future.

MR. HACCHE: The lady in the front row.

QUESTION: The WEO calls for--

MR. HACCHE: Name and affiliation?

QUESTION: Emily Schwartz with Bloomberg News. The WEO calls for a 1.4 percent economic contraction in Argentina compared with previous expectations for at least some growth, maybe 1 percent or 2 percent. What kind of impact will that have on Argentina's ability to access international capital markets? And if it can't get back to those markets, what do you see happening next year?

MR. ROGOFF: Well, clearly a lot depends on Argentina's successful implementation of its zero deficit plan, which it has chosen and adopted. The IMF, although recognizing the risks in the situation, has chosen to support this plan, and it's, I guess, awaiting what happens and events.

Did you want to add anything?

[No response.]

MR. HACCHE: The lady here in the front row.

QUESTION: Yvonne Esterhazy with the Financial Times Deutschland. Mr. Rogoff, you said there was room for maneuver on the monetary side when it comes to U.S. What about the fiscal side? There's a lot of talk about economic stimulus packages and, you know, further tax cuts and so on. Mr. Greenspan seems to be saying that you should be--they should be cautious. What is your view?

MR. ROGOFF: I think the fact that there was some fiscal stimulus already in the pipeline was a good thing and the automatic stabilizers should be allowed to work.

However, fiscal policy has long and uncertain lags. It makes a big difference if you put in temporary cuts or put in permanent cuts, and not just the current picture but the long-term picture. It's a very blunt instrument for trying to deal with a recession. So I think it's something one needs to move very cautiously as a countercyclical tool, and we, I guess, advise against any frantic and ill-focused reactions.

MR. HACCHE: The gentleman there, please.

QUESTION: Giampiero Gramaglia, Italian news agency ANSA. What kind of message do you expect and do you wish from the G-7 meeting next week for the world economy?

MR. ROGOFF: If I could forecast a week ahead to what we'll be seeing at that point, I might be saying something somewhat different today. But I think we'll see a sober and realistic assessment of the world economy, yet recognizing that there is--there are many grounds for optimism, as I've tried to emphasize in my statement today.

MR. HACCHE: The lady there.

QUESTION: Christiane Oelrich, German Press Agency. You note in the WEO that domestic demand growth weakened particularly in Germany. What is your message to the German Government?

MR. ROGOFF: I think we particularly focus on longer-term structural reforms in Europe as being the most important thing that needs to be undertaken. Turning ahead to Chapter 3 of the WEO, there has been a significant IT revolution, and there's a question of how fast this will pass on to different regions of the world. And our feeling is that the more flexible economies are, the more able they are to adapt and respond to the needs of the IT revolution and enjoy its benefits.

So I think our focus is on longer-term issues and structural reform. That's something we feel confident in, and, again, I'm going to say if David wants to add something.

MR. ROBINSON: Just to add a couple of words on the macro side. I think you're right in pointing out what we say on domestic demand in Germany. Germany got hit first by the oil crisis and the depreciating euro, and since then it's been increasingly affected by the external slowdown that we've seen.

In terms of the macroeconomic policy recommendations, I think that we would say, as we're saying to other governments in the euro area: allow the automatic stabilizers to work on the fiscal side. Don't tighten underlying fiscal policy in order to meet the target in the stability program this year. Instead, let the economic automatic stabilizers work, and as the economy later recovers and revenues come back, that will still bring you into line with the medium-term fiscal targets that are so important under the Stability and Growth Pact.

Obviously, Germany will also benefit in terms of activity from the easing of monetary policy that the ECB has undertaken over the last three or four months.

MR. HACCHE: The gentleman here in the second row.

QUESTION: My name is Mikoda with NHK Japan Broadcasting Corporation. WEO showed 1.3 percent for U.S. growth rate this year and minus 0.5 percent for Japan. But you said you didn't complete assessment of the impact of terrorist attack, and it's too early to have the concrete figure for the U.S. growth rate. So how can we treat these figures, 1.3 percent for U.S. and minus 0.5 percent for Japan?

MR. ROGOFF: I think that if we were doing the numbers today, it's quite likely that, especially for the United States, they would turn out somewhat lower than they are. But we decided not to try to present a hastily different number because we didn't feel there was adequate information.

That said, I don't want to overstate the changes that we would necessarily make--it very much depends on how economic and non-economic events unfold.

MR. HACCHE: The gentleman here in the front row.

QUESTION: Steve Morrissey (ph) with Petroleum Argus. Given the uncertainty about the timing and extent of any U.S. response, military response to September 11th, what impact do you expect that to have on oil markets? Are we in for a period of increased volatility? Will they remain fairly quiescent? And what impact do you expect to have of the oil market response on economic growth?

MR. ROGOFF: If I were to try to highlight one uncertainty which we don't emphasize as much in the published version of the WEO but might have been added shortly after September 11th, one might have had concern about volatility in world oil markets.

That said, prices have actually fallen substantially from where they are on September 10th. Future prices don't show signs of expectation of a rise. So there are two countervailing factors. The weaker global economic outlook is tending to drag down oil prices, and heightened political uncertainty might add to them. They're more volatile, but I think I'm cautiously optimistic that that's not going to be a major source of problems in the global economy in the months ahead.

MR. HACCHE: The gentleman here.

QUESTION: My name is Nestor Ikeda for the Associated Press covering the Latin American (?) . I would like to jump to Latin America as a region. In your report, you are forecasting a downturn of 2 percent in the growth for this year for the oil region. How much worse is the situation going to be after the September 11 events?

MR. ROGOFF: Clearly, there has been an impact on emerging markets--and in Latin America in particular--first, in that the U.S. economy and slower global growth is a factor; and, second, in some economies the flight to quality, the higher interest rates and bond yields and short-term pressures in markets are significant.

I would say that we are monitoring the situation. It's something we watch. But it's really premature to make any quantifiable assessment at this point. I certainly don't feel comfortable in doing so.

MR. HACCHE: The third row.

QUESTION: Okay. I'm Goran Johnson (ph) with the Swedish business paper (?) Industry. Do you think that the U.S. will avoid a recession?

MR. ROGOFF: I think it's a done deal.

QUESTION: [inaudible].

MR. ROGOFF: Well, the conventional recession of having two quarters of negative growth seems to be a significant likelihood. Whether it'll be a bit above zero or a bit below zero, [that] there will be a drop in U.S. growth over two quarters is very likely. But whether it's a sustained recession is entirely another matter, where I think there's every cause for optimism about a V-shaped rebound next year.

MR. HACCHE: Behind you, Barry Wood.

QUESTION: Barry Wood, Voice of America. In light of this synchronized slowdown and now September 11th and what you've just said about done deal and U.S. recession, what kind of coordinated response, aside from monetary policy, is appropriate from the major nations?

MR. ROGOFF: I think what we've seen in the United States so far has been very aggressive and appropriate in light of the risks, and we welcome the ECB's monetary easing. And as I've said, even independent of these events, there is scope for further quantitative easing in Japan.

However, I think, really, it is appropriate to move a bit slowly beyond this and see how events unfold. There is every possibility that the economy will rebound from what I want to emphasize for the global economy is not--is not in recession. We are not in a global economic recession. And even for the United States, there's certainly, as Mr. Greenspan emphasized, a pause in activity following September 11th. But there are many reasons to be optimistic that the economy will rebound.

So we could easily find ourselves in a situation where we overreacted, that too much was done too soon.

MR. HACCHE: Can we take one from the back, way back there? Mr. Sotero?

QUESTION: Paulo Sotero from O Estado de Sao Paulo, Brazil. Sir, you are projecting an increase of the Brazilian current account deficit to 5 percent this year. I'd like to ask you: In view of the recent--the impact of the recent events in Latin American economies, as you mentioned, how do you see the chances for Brazil to continue to attract the foreign flows of capital that are so vital to keep the situation under control?

MR. ROGOFF: Clearly, Brazil's situation has become more difficult, not--both because of the global events and also uncertainties surrounding Argentina. However, the fact that Brazil has a flexible exchange rate is something that's extremely helpful in forestalling the worst possible crises, and so, again, I think it really depends on how events in the coming months unfold.

And, Tam or David, did you have...

MR. ROBINSON: Just to add one point, I think this is another reason why the fiscal consolidation, the enhanced, increased fiscal consolidation that the Brazilian authorities have put in place under their program, which was supported, as you know, by the Fund last week, is so important, because that will help keep the size of the current account deficit under control.

MR. HACCHE: The second row here.

QUESTION: Bob Samuelson, Newsweek. On Japan, your forecast is showing it going from minus 0.5 percent growth this year to a plus 0.2 percent next year. Forgetting about the terrorist attack for a moment, can you just explain where the sources of growth were coming from in Japan? Most analysts looking at their proposed or possible reform program, including faster write-offs of bank debts, bad bank debts, and things like that, conclude that the initial effects would be depressing for the economy, higher unemployment, and certainly that could not improve consumer sentiment.

So previous to September 11th, where were the sources of growth coming in Japan? And the second part of the question is: On the monetary policy in Japan, exactly what is the mechanism by which more monetary ease is going to stimulate the economy? Isn't it quite possible that more monetary ease will just mean larger amounts of unlent reserves in the banks?

MR. ROGOFF: Let me begin with your last question. I think it's clearly been a problem in Japan in recent years, that there's been mild deflation, and it would be desirable to move to a situation where there was some low level of inflation such as we see in the United States and Europe. And I think there are many ways to achieve this. It was not so long ago that everyone worried about finding ways to get rid of inflation, not finding ways to create it. And there are many mechanisms--buying back government debt, not the last of them. So it's really a question of what approach that the Bank of Japan chooses to use. This is something that can be done.

In terms of its transmission to the rest of the economy, I think there's a great deal of empirical evidence suggesting that having prices fall puts more of a strain on the flexibility of the economy than having a slight rise in prices, which is why many central banks aim to target at an inflation rate of 1 to 2 percent, even that they call that zero inflation.

So I think it would make a big difference and is something that is very important to work towards.

MR. HACCHE: The gentleman there.

QUESTION: [inaudible-off microphone].

MR. ROGOFF: Well, I mean, I guess the--we are optimistic that many of the problems in Japan are now understood and that there is some energy among Japanese policymakers and momentum to move towards addressing these problems. And I think these very low--this low level of growth is certainly not unrealistic.

I might add to that that we do have these underlying trends in productivity which have not been fully enjoyed in Japan but eventually will be. And there is some long-run pressure towards growth coming from that source.

QUESTION: Sam Gilston (ph) with Washington Tariff and Trade Letter. In the new report, you've reduced the projections for trade growth from the earlier May projections. Do you see some further reductions coming in the wake of September 11th? And you referred to consumer and business sentiment in the U.S. market and other markets. What sentiment do you foresee this whole change having on foreign direct investment and just doing business in general around the world?

MR. ROGOFF: Well, I think the process towards increased globalization is an extremely important one, and that has benefited a great many of the world's people. And the International Monetary Fund as an institution plays an important role in this, and we hope to continue to do so.

I think it's natural to have some concerns that there would be higher transport costs, higher insurance costs associated with events following the terrorist attack. However, I believe that these are overwhelmed in the long run towards the many pressures which will be leading us to trade more as world economies become more technological, more specialized. All of the factors which have been leading to further trade are still in place, and I think these are overwhelmingly the dominant factor. And I do not hold with the pessimists, trade pessimists, who think that this will lead to a sharp setback in that sphere.

MR. HACCHE: Can we take two more questions, please? One here in the front row.

QUESTION: Simon Broder (ph), Business Day from South Africa. In the WEO, you're quite glowing about South Africa and saying its vulnerability to external shocks has been substantially reduced by the sound macroeconomic policies, et cetera.

What then do you attribute--to what then do you attribute the ongoing and increasing weakness of the rand? And what can the South Africans do to turn that around?

MR. ROGOFF: I think I'm going to turn this to Tam.

Tamim Bayoumi

MR. BAYOUMI: Yes. South Africa has benefited over the last year from sound macroeconomic policies which have allowed the reserve bank to cut interest rates by 1 percent in June. While you're correct about the exchange rate pressure on the rand, the impact of the terrorist attack need not be as large on South Africa as on some other countries because of the large exports of gold, and as we know, when there is a flight to quality, the price of gold generally goes up. And that will help to support the external position and, therefore, presumably at some point reduce pressures on the rand.

MR. HACCHE: Second row there on the right.

QUESTION: Marty Crutsinger with the Associated Press. Could you help us understand your phrase "rather lower" for economic growth next year than the 3.5 percent overall? Is that a half percentage point less? And does that depend on a V-shaped recovery in the U.S.? And given all the downside risks that you have listed in this report, where do you put the odds of a global recession right now? Is it 25 percent, 50 percent? Just where?

MR. ROGOFF: Well, first of all, the IMF does not have an official definition of a global recession, and if you take one quick look at the data given in Figure 1.1 of the WEO, you can see why.

The world has never experienced negative growth in any year since 1970. Even the recessions of 1982 and 1990-91 were, from a technical perspective, only growth recessions, where the world growth rate dipped temporarily below 2 percent.

From an arithmetic perspective, even with the events of September 11th, this is virtually impossible at this point in the calendar year for 2001. Our baseline for 2002 of 3.5 percent may or may not turn out to be correct, but, regardless, it would take a significant further bad turn of events beyond what we can envision at present just to carry growth down to what was a global growth recession in 1990-91, where the levels dipped below 2 percent.

MR. HACCHE: Thank you very much.

Can I remind you finally that Tom Dawson, our Director of External Relations, will be giving a briefing at IMF headquarters on Friday at 9:30.

One final remark from Ken Rogoff.

MR. ROGOFF: Yes, I need to make one final remark reflecting my much greater experience at lecturing in my Harvard classroom than giving conferences of this sort. I have to withdraw my remark "done deal" simply because we know that growth is going to be lower for the United States, but, I mean, we simply have no idea of exactly how much lower. So what I meant by that, it's clear that growth will drop from what we thought it would have been on September 11th, but exactly what it will turn out to be by the end of the year remains to be seen. So I wish to withdraw that remark, and I will try not to do it in the future.

MR. HACCHE: Thanks very much.

[Whereupon, the press conference was concluded.]