Transcript of a Press Conference by IMF Managing Director Christine Lagarde at the end of a G-20 Meeting of Finance Ministers and Central Bank Governor Meeting
February 23, 2014Sydney, February 23, 2014
MS. LAGARDE: Welcome. Thank you very much for being here and thank you to the Australian people and certainly to the Australian authorities for their hospitality and for hosting a very successful G-20 meeting. I would like to single out, indeed, Prime Minister Abbott, Treasurer Joe Hockey, and the Governor of the Central Bank, Glenn Stevens.
I think you have received a press release that we have issued, but I'll very quickly elaborate on that. We at the IMF observe, analyze the global economy, the downside risks and recommend policies. What we are seeing at the moment is certainly a global economy that is picking up. Our forecast for growth in 2014 is 3.7, for 2015 4 percent.
We certainly have welcomed the focus on growth that the Australian Presidency has identified as the rallying factor for all economies, both advanced economies and emerging market economies.
Now, I'm singling out those two categories because there was -- initially when this meeting started there was anticipation that there would be hostility, disagreement, adversarial discussions between the advanced economies and the emerging market economies, particularly focused on the tapering effect of the unconventional monetary policy by the U.S. Federal Reserve on the emerging markets in general, particularly as a result of the volatility and the capital inflow movement.
Interestingly enough, and thanks to the good cooperation that was induced by this meeting, we did not have that. We had a very solid, consistent exchange of views, respect for each other's necessary policies, understanding of the spillover effects that one would have over others, and there was certainly, as a rallying factor, growth to bring all authorities together.
So what the IMF had done, at the request of the Australian presidency, was to put together an analysis, and our economists have done quite a bit of work ahead of time, an analysis of what would be required, what reforms would be needed in order to achieve more and better growth going forward.
Through reforms, fiscal reforms, structural reforms, monetary policy that is mindful of its domestic effects, but also of its spillover consequences, we arrive at 0.5 increase of GDP over a period of five years which totaled 2 percent additional GDP over that period of five years.
We believe that if the reforms that have been identified are adhered to, delivered by the various authorities, than that is a goal that can be achieved and possibly exceeded.
Now, it is what I've called the two purposes if you will, with a 2 percent GDP increase with this 2 trillion additional that could be delivered. The two arms of the balance, because everybody wants a balanced growth, and certainly, as was reminded by our Japanese and Korean colleagues, the two agendas that are necessary in order to properly deliver on that growth imperatives that they have set for themselves.
Now, because the Australian presidency is clearly action-orientated, we will continue to act, and we will certainly see to the fact that the G-20 members identify those reforms, identify those actions that are needed to deliver on this 2 percent objection.
So work is underway. There has clearly been an endorsement of the paper that we have proposed and the modelization that we put together. It's now for the members of the G-20 to identify those actions that they will take and for all of us to keep working at it to make sure that there is delivery.
I think that really sort of encapsulates quite well what happened during those two days. Certainly there was an excellent spirit and a good global cooperation on all accounts. Whether it was to discuss the monetary policies, whether it was to discuss the structural reforms that are needed in order to achieve those goals, we saw that in Sydney. Thank you. I'll be very happy to take a few questions if you have some.
QUESTIONER: Thank you, Madame Lagarde. Your IMF report late last week outlined the growth potential, and it also came with four broad reform agendas that would need to be tackled to get to that goal.
Now, today's communiqué did not specifically mention the four reform areas identified in last weeks' IMF report, but do you see that report as underpinning today's communiqué? Do you see today's communiqué as recognition of those four reforms including: labor market reform, fiscal reform, etc.?
MS. LAGARDE: First of all, thank you for reading the report and looking at the Box 1 of the annex which is exactly where we have the hypotheticals, if you will.
Endorsing the objective presupposes that you agree with what needs to be done. Now, it is going to have to be country specific, and we've heard today several countries, you know the like of China and Japan or Mexico, for instance, indicate what is in their plan, what they're setting out to do which would respond to the four big categories that you've identified.
QUESTIONER: Madame Lagarde, I'd like to ask a question about Ukraine. Did you personally discuss the situation in Ukraine with the G-20 Financial Ministers? Mr. Hockey less than an hour ago told us that the IMF remains the institution best prepared to help countries in transition, including Ukraine. Is the IMF ready to discuss the possibility of any of the measures along to Ukraine or maybe stir it up? Thank you.
MS. LAGARDE: Well, first of all, Ukraine is a member of the IMF. Second, the IMF is here to serve the entire membership, so if the Ukrainian authorities were to ask for IMF support, whether it's policy advice, whether it's financial support together with economic reform discussion, obviously we stand ready to do that.
We certainly hope that if the situation settles and if we have counterparties, because we need to discuss with somebody when we help our members. We will be ready to engage, ready to help with the diagnosis of the current situation which clearly has evolved dramatically over the last few weeks. Not only from a humanitarian point of view, but also from an economic point of view, before we, of course, try to go further and play the catalytic role that the IMF typically plays in such situations.
QUESTIONER: Madame Lagarde, just following on from Ukraine. How well-positioned is the IMF to be able to come to the aid of countries like Ukraine or other nations that might need your help considering the stalemates in reforms to the IMF in general?
MS. LAGARDE: As I just mentioned, we help any of our members at their request. So that's the first, you know, hypothetical, that we are asked by the Ukrainian authorities to help out. But clearly we can provide various things.
We obviously have to do enough of an economic diagnosis to understand what the position is in the country and what the public finance, the equilibriums are and so on and so forth.
Then it's a question of what kind of support we can give. Clearly in partnership with the country because, at the end of the day, it's a set of economic reforms that have to be put in place in order to restore the situation, and make sure that the country can actually set about responding to the needs of the population and restoring economic stability.
QUESTIONER: There must be a degree of frustration though, I would have thought, over the ongoing, sort of stalemate of reforms to increase the quotas, the IMF and funds available to help?
MS. LAGARDE: Are you focusing on Ukraine or something else at the moment?
QUESTION: More broadly.
MS. LAGARDE: That's a broad question you're asking. At the risk of repeating myself, we are here to support our members under the terms that the IMF has to operate. We wait for our members to ask for support and help. We certainly have been identified by the various members around the table today as the institution that can help and support members in such situations.
QUESTIONER: The IMF has been very clear in recent weeks about what it might expect from Ukraine under a bailout program in the review of the last Ukrainian bailout. Is there any wiggle room? You understand what I'm talking about in terms of the preconditions for a bailout, meaning preconditions for a bailout. Would the IMF think about relaxing those preconditions?
MS. LAGARDE: First of all, as I said, Ukraine is a member of the IMF and it is a full-fledged, completely legitimate member of the IMF.
Second, we need to have somebody to talk to, okay? Because any discussion takes two. The IMF on the one hand, the representatives of the country on the other one. So that's condition number one.
Condition number two, the economic program has to be owned by the authorities, by the people, because at the end of the day it will be the future of the Ukrainian economy.
Number three, we have to operate under the rules. We are not orthodox in that respect, but there are improvements, there are economic reforms that we all know need to be started, at least, in order for the international community to help and support a country financially. That's what we will do if we are so asked.
QUESTIONER: Can you just describe the catalyst for what you described as a lowering of the temperature in the room between emerging economies and the advanced economies over monetary policy, and perhaps the IMF Quota Reform, which I think is what my friend was referring to before, and the fact that it was blocked in U.S. Congress?
Specifically there are changes in language in the communiqué as far as I can tell about the conduct of or reversals or changes in advanced economy central bank policies. So can you just describe the various inflection points and triggers and catalysts for that change in atmosphere, please?
MS. LAGARDE: You know, first of all I would commend the Australian authorities and Joe Hockey and his colleagues, and the team working with them for facilitating a good dialogue and a good discussion.
Second, I would point to an open mind on the part of all participants to look at what is required domestically, what the consequences are. How much interdependency there is between the advanced economies and the emerging market economies? Confidence from all that -- because of the interconnectedness, because of the growth in the emerging market economies recently, there is a solidity on all sides to actually face what will inevitably be volatility in the future. Because, you know, monetary policies do not change as they will have to change without a degree of volatility which should be just part of the regular terms and conditions under which economies operate.
QUESTION: (off mic).
MS. LAGARDE: It certainly was not the difficult debate that was portrayed in advance of the meeting.
Okay. Last question.
QUESTIONER: If you do not get the reform that is being request as Section 8 of the communiqué, is there a point at which the IMF itself loses effectiveness to respond not only to matters such as Ukraine, but to other issues that might affect developing economies? At what point does that come?
MS. LAGARDE: First of all, nothing is going to stop me from trying to be effective. I hope to convey the entire organization that we just have to keep at it and do the job that we are tasked to do.
Having said that, we need reliable, long-term resources in order to face potential risks and potential crisis, and there will be such things in the future.
Second, we need to have an institution that is representative of the evolution of the economy which requires that the 2010 reform be actually delivered upon by the membership. Which I very much hope it will be.