Press Briefing by Masood AhmedDirector, External Relations Department
International Monetary Fund
May 24, 2007
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MR. AHMED: Good morning and welcome to our regular press briefing. I am Masood Ahmed.
Let me start off today with a small bit of advertisement which is to alert you all to look at our redesigned web site for the IMF which went up last week. It's still got the same URL: www.imf.org, but the web site has been redesigned to provide a better overview of the content. It also now includes an online version of the IMF Survey which previously used to be a print biweekly, and that's where you'll find on the web site, our current views and items of interest on policies or research.
Let me also give you a couple of travel updates. I'll start with the Managing Director, who will be attending the G-8 Summit in Heiligendamm in Germany on June 6th to 8th.
The First Deputy Managing Director, Mr. Lipsky, will be traveling to Brussels to speak at the Economic Forum on Global Adjustment at the EMU which is sponsored by the European Commission on May the 31st. He is then going to proceed to Budapest, Kiev, and Sofia for meetings with authorities in these countries, June 4th to 7th.
With that, let me take any questions that you have. Please identify yourself and your affiliation.
QUESTIONER: Masood, have you got anything for us, any comments on the rise in the oil prices and what you think that is now?
Initially, during the Spring Meetings there was the risk of falling back as the prices had been low, and now they've come back again. There seems to be some worry regarding consumers and so on.
MR. AHMED: On oil prices, as you say future prices which form the basis of our own oil price predictions have risen by about 8 percent since the April World Economic Outlook which was the basis of what was discussed at the Spring Meetings. In the U.S., gasoline prices have risen by over 20 percent over the same period. Clearly, what these developments have done is increase the downside risk especially for U.S. consumer expenditure.
I should say, however, that we do not feel that this will have a tangible impact on global prospects. We have seen this kind of volatility before, and the experience of the past few years suggests that both global growth and inflation are not very sensitive to oil price variations in this sort of range. Nevertheless, I should also add that geopolitical concerns remain since spare capacity is still quite limited and oil demand remains solid. Reflecting these, futures markets suggest that price risks are on the upside in the period ahead, and we continue to be concerned about the possibility of a price spike with a larger economic impact than what I have indicated with the current range.
QUESTIONER: Last week, the IMF went forward with a $1.1 billion disbursement to Turkey as part of their loan package. There has been some concern about the program with Turkey in light of a lot of changes that the IMF has suggested that Turkey has not gone forward with. Can we take it that this disbursement is a sign that the IMF is happy with the progress they are making in the privatization of their electric grids?
MR. AHMED: Yes. Our view, as set out in the statement that was done after the conclusion of the Board meeting, is that we believe the authorities should be congratulated for putting together a strong policy package which has facilitated the completion of the sixth review of the program which you're referring to. In particular, we think that the understandings reached on the measures to keep the fiscal program targets intact are a clear demonstration of the authorities' resolve to persevere with good policies.
More broadly, as we've said before, we think that Turkey's economic performance in recent years has been impressive which has been thanks to sound policies and structural reforms and also to a broadly favorable external environment.
We also said, however, that the goal now needs to be to build on the success of recent years by first sticking to fiscal and monetary discipline to make a final push on disinflation and, secondly, to broaden and deepen structural reforms to durably raise growth rates to the levels that are seen in the fastest growing emerging markets.
QUESTIONER: Masood, was there any discussion further with Turkey regarding the program itself? They are still going to stick to the program or is there any sort of feeling that they might just pay it off and walk away?
MR. AHMED: As far as we're concerned, we have just had a Board discussion, and I have just said what our view is on it. That's where we stand.
I have a question that has just come in about Italy which I'm going to try and respond to as well. The question is: The OECD has updated its forecast for Italy's growth to 2 percent in 2007. Do you foresee a possible upgrade of the IMF's forecasts?
What I can say in response to that today is that we do have a staff visit planned in the middle of the year in June, and that would be the occasion for us to take stock of current developments. If, in the light of that, we also feel that we should be upgrading our forecasts, it would come following that staff visit.
QUESTIONER: Masood, the visit by John Lipsky to Eastern Europe, what is that about? Is it mainly on specific areas that he is going?
There is also some concern and there has been some talk about the overheating in the Baltic States. Have you got anything on that?
MR. AHMED: As I said, Mr. Lipsky's visit is to Hungary, Ukraine, and Bulgaria. This is essentially part of the regular process of periodic management visits to discuss with authorities both development in the countries but also overall outline the Fund's own agenda and make sure that we get broad inputs and support for that agenda.
I don't see at this point that there is a particular issue that needs to be put on the table that I have in my briefing, but I can certainly double-check on it. As far as I can tell, this is-unless I come back on it-it's just a regular program of visits.
QUESTIONER: I'm just trying to figure out where things stand at the moment on the `77 decision. Is there any update on that? Is it going? Is there a meeting?
I know that there is some discussion considering that the surveillance report has just come out, that obviously the `77 decision would now be a priority.
MR. AHMED: First, just to agree with you on the final point you made which is that the `77 decision, moving forward with a review and an updating of the `77 decision is indeed a priority which we have set out. As you say, the recent report that was done on the Fund's advice on foreign exchange rate policy in the period 1999 to 2005, even though that's sort of looking backwards and it's a bit outdated, the core point that it makes is that we do need to continue to focus on and strengthen our work on surveillance of foreign exchange and reinforces the importance, in our view, of moving forward with the updating of the `77 decision.
And so, the plan now is that we will have a discussion of that in the Board, I believe in the next four weeks, but the exact date on that will come out in the context of the work program discussion. The work program document will be released in early June, so that will be the point at which I will be able to give you an exact date on that, but it's in the upcoming weeks.
I have one more question that has come in from Antigua: Have the negative reports from the Cricket World Cup in 2007-lower than expected turnout and negative publicity that plagued it-affected the economic projections in CARICOM? Are impact studies underway?
My response to that is that the impact, if any, of those developments and indeed the overall assessment of what's been happening in the economies of the CARICOM and their prospects will be taken into account in the next Article IV missions that the Fund will do. I don't have an exact date for those Article IV missions, but it will be done obviously during the course of the coming months. When that's done, that will be the point at which we will take into account the impact of lower than expected turnout on the World Cup on those economies.
QUESTIONER: Just double-checking, did Mr. de Rato have a meeting, or anybody from the Fund, with the Chinese delegation?
MR. AHMED: During their current visit here you mean?
No, we haven't had meetings with the Chinese delegation during their visit here, but you should be aware of the fact that we do have a staff team which is carrying out the work in preparation for the Chinese Article IV consultations that is in China now. So that's where we're having consultations, but there haven't been meetings anywhere else.
QUESTIONER: So there's a mission in China?
MR. AHMED: There's a mission in China, absolutely.
If there are no further questions, two weeks from today, same place. Thank you very much.
IMF EXTERNAL RELATIONS DEPARTMENT
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