Transcript of a Press conference by Masood Ahmed, Director of the External Relations Department, IMF

September 6, 2007

Washington D.C.
Thursday, September 6, 2007
View a Webcast of the press briefing

MR. AHMED: Let's start, we are a couple minutes late, just to welcome you back to our regular fortnightly press briefing. I am Masood Ahmed, and this press briefing today is embargoed until 11 o'clock Washington time, which is 1500 GMT.

Before I take your questions, let me just make a few announcements on management travel. Let me start off by saying that the Managing Director will be in Italy from tomorrow until Sunday where he will attend the Ambrosetti Forum and where he will be making a speech tomorrow on the implications of recent financial market turbulence on the global economy. That speech will be posted on our website, and I encourage you to look at it. On Monday, September 10, the Managing Director will be in Lisbon, Portugal, where he will meet with Portuguese authorities to discuss the Fund's Reform Agenda. As you know, Portugal currently holds the Presidency of the European Union. Also on Monday, September 10, I should mention to you that here in Washington at 10:00 a.m. the Director of the European Department, Michael Deppler, will be holding a conference call with the press to launch a new IMF book which is called "Integrating Europe's Financial Markets." We will post selected chapters of the book under embargo on Friday on the Media Briefing Center.

Later this month, on September 19 and 20, the Managing Director and President Garcia of Peru will inaugurate a seminar on macroeconomics and equity in Lima. The event is organized by the IMF and by ECLAC, U.N. Economic Commission for Latin America. There will be media availability for the Managing Director on that occasion.

Let me also tell you that in the week of September 17, the First Deputy Managing Director, Mr. Lipsky, will speak on the 17th here in Washington, D.C., at the Association of American Chambers of Commerce in Latin America's 40th Annual Meeting. And later during that week he will be speaking in Seoul, in South Korea, at a joint seminar on Korea 10 Years after the Financial Crisis, which is being co-sponsored by the IMF and the Korean Institute for International Economic Policy. Closer to the date for these events, Media Relations will give you more information on them. And finally, just to remind those of you who have not already done so, that the online press registration for the Annual Meetings of the World Bank and IMF, which are going to be held here on October 20 to October 22, is now open and the relevant information for the media including a tentative schedule of events is posted on our website.

With those announcements, let me now take your questions. And again, let me encourage those of you who are participating through the Media Briefing Center to please send in your questions early so we can get to them during the course of this conference. Please identify yourself when you ask your question.

QUESTIONER: Could you please update us on the designation process of the new Managing Director of the IMF? And could you please tell us when are the next auditions or hearings of the candidates will take place?

MR. AHMED: Just to remind you, on Friday, August 31, when the nomination period closed, we did put out a press release that set the next steps that the Executive Board would be following in taking forward the process of nominations for the next Managing Director. I can give you a little more information today on timing of that process. Specifically, the Executive Board plans to meet with the two candidates here in Washington during the week of September 17, and it aims to complete its deliberations and to bring the process of selection to closure by the end of September. That is the additional information I can give you on timing.

QUESTIONER: How many auditions will take place? Only one during that week?

MR. AHMED: They will meet with the two candidates, one on each day, and they will have a series of discussions with them. Of course, while the two candidates are here, they may also choose to have other meetings alongside, but they will be meeting with the Executive Board in a formal sense on one day, each of them during that week.

QUESTIONER: Sorry, a follow-up. You can't be more specific on the dates? Will there be any announcement when it's going to take place, precisely which day?

MR. AHMED: We will come back to you with certainly which day during that week, but today all I want to say is that it's going to be during that course of the week. One day during that week they will meet with one candidate and another day during that week they will meet with another candidate. And as I say, there will be some time during that week also for the candidates to meet with other people in Washington or whatever they would like to do.

QUESTIONER: I have a question about the actions that the central banks are taking in this moment starting from the European Central Bank that today left unchanged the rates and the expectation for the 18th meeting of the Fed here. I just wanted to know if the actions that the banks have taken are coherent with the expectations and the indications of the IMF.

MR. AHMED: I think what we have said about this issue in the past, and which I can repeat today, is that we think that the process of market turbulence, events that are unfolding, is still a process that is underway, that during this period the actions that a number of major central banks have taken to provide liquidity to help the functioning of markets, has helped to create a climate during which this adjustment, the reappraisal of risk that is taking place, can be done in an orderly way. So we have been supportive of the actions that have been taken.

I see there is a question that has just come in from the Media Briefing Center, so let me turn to that. It is a country question on Peru. The question is, "Has the IMF estimated the impact in the Peruvian economy of the August 15 earthquake? Some analysts say it would reflect a 0.5 to 1 percent fall in the national output." First of all, I should say to you that we have a team that is going to be in Peru in October [a mission is going for the second review under the current Stand-By Arrangement] and will be able to do a more comprehensive, definitive assessment of the impact, but we do have some preliminary estimates of the economic impact at this point. I should say that in economic terms, looking simply in the narrow sense that you posed the question of the impact on GDP, the preliminary estimates are that the impact is likely to be relatively small, in the range of 0.3 to 0.5 percent. But obviously, it is important to move beyond that simple statistic, and the two things that we do think are important are within the economic sense, first of all, that the government and private-sector efforts to mitigate the impact on the regions directly affected are very important and need to go forward. Secondly, of course, there has been in a human sense the toll of life and disruption for which the Managing Director has already sent his sympathies to the authorities in Peru.

QUESTIONER: If we can talk about Brazil for a minute. We saw last night that Brazil trimmed its interest rate again but by a smaller amount than we had seen in the last few months. What is the IMF's view on Brazil's monetary policy, and where do you see it going from here?

MR. AHMED: I don't have a specific answer for you on the changes of yesterday, but our view on Brazil which we have articulated is that its sound macroeconomic management provides a foundation for stability and sustainable growth, and in turn for a lasting improvement in social conditions. In fact, we think Brazil appears to have weathered relatively well the recent financial market turbulence which testifies to the prudent macro policies of the government and the efforts that have been taken in recent years to reduce vulnerabilities in the economy.

QUESTIONER: Do you have an assessment or first evaluation of the economic impact of this period of market turbulence?

MR. AHMED: What we have said so far is that the process is still unfolding, so bear that in mind, and it is a bit early for us to come out with a definitive assessment of the impact. The second thing that we have said also is that it is important to remember that this period of turbulence comes after an exceptionally long period of benign conditions in international economic markets, but also of growth that has been high in most countries around the world over the past few years. So that gives us a cushion against which we are working.

Having said that, our assessment is that we can already say that there will be some downward revisions to our growth projections, more so next year than this year. We can already say that the downward revisions are likely to be the largest for the United States, but we will also see some impact in the Euro area. And we have already said that we think growth prospects for the emerging markets as a whole remain relatively robust not least because of the fact that many emerging markets have much stronger fundamentals today both in terms of policies and balance sheets than they have had in the past.

But the balance of risks to global growth has tilted to the downside and we should say that amongst emerging markets there are some pockets of vulnerability particularly countries that have relied heavily on external financing or have allowed short-term financing to feed domestic credit booms. Overall though, even with some downward revisions, we can envisage a relatively strong global growth performance continuing partly for the reasons that I set out at the beginning which is that we are starting from a relatively sustained period of high growth.

In terms of process, we are now going through a process of looking at our projections and estimates for growth country by country. As you know, the IMF process helps us because we do have relationships with 185 countries and so our estimates are going to built up at the country level and that process will lead to a new set of country, regional, and global forecasts and estimates and projections which will come out with the WEO, the World Economic Outlook, in the week before the Annual Meetings, that is to say, in the middle of October. Also I should mention to you that we are likely to have this year the release of the Global Financial Stability Report which is our assessment of the financial markets come out somewhat earlier to be able to provide a more timely assessment. I don't have an exact date for you yet on it, but we anticipate that that will happen later this month towards the end of September rather than in the middle of October. So that's what I can give you today in terms of where we are on our assessment. Let me just take a follow-up and I'll come to you.

QUESTIONER: And just a small follow-up. When you said there is going to be some revision downward and you said especially next year, especially for 2008? That's what you meant?

MR. AHMED: Our preliminary assessment is that the impact of the financial market turbulence simply because of when it is happening in the calendar sense will be felt more on the numbers for next year than it will be for this year, but that is the process that we are now going through.

QUESTIONER: Just to make it very clear, this revision will concern the United States specifically...

MR. AHMED: No, this is a process that we are going to look at all countries. Our preliminary assessment is that there will be some revisions downward. As I said, we expect these to be larger in terms of the estimates that we have made for the United States, but there will also be revisions in other parts of the world including, as I mentioned, we think there will be some impact in some emerging markets.

QUESTIONER: And in the Euro area?

MR. AHMED: And in the Euro area we expect some impact. We haven't yet worked out exactly what the impact will be. That's the process that is underway. But we think this process will have some impact. Are there any other questions?

QUESTIONER: I have a last one. I'm sorry. There is so much going on in this period. About the subprime mortgage crisis, is the IMF looking particularly at that in view of the World Economic Outlook we are expecting for October? I mean is there going to be some specific analysis about that?

MR. AHMED: Yes, there will be, and it will be in the Global Financial Stability Report which looks at financial markets. We will be looking at the issue of both trying to understand better how the current financial market turbulence and crisis came about, and in context obviously we will be looking at the subprime market issues, but we will also be looking at the channels by which it has been transmitted from that particular market to other markets in the financial area, and we will be looking at what preliminary lessons one can draw in terms of market practices that might need to be revisited to draw upon the learning from this period. So we will begin to address all those issues in the context of the Global Financial Stability Report.

I should also say to you that our current views on this will be articulated in the speech that the Managing Director will give tomorrow in Italy and which will be on our website. That will give you a kind of immediate assessment, and then we will follow-up during the course of the next 4 weeks leading up through the GFSR and into the WEO and the Annual Meetings.

No further questions? None from the Media Briefing Center? Our next briefing will be at the same time on September 20. Thank you all very much.


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