Transcript of a Press Briefing by Gerry Rice, Director, Communications Department, International Monetary Fund

August 29, 2013

Washington, D.C.
Thursday, August 29, 2013
Webcast of the press briefing Webcast

MR. RICE: Good morning, everyone, and welcome to this press briefing on behalf of the International Monetary Fund. I'm Gerry Rice, the Director of Communications at the IMF, and nice to see everyone back after the summer recess. As usual, this briefing will be embargoed until 10:30 a.m. Washington time. Also as usual, let me begin with a few pieces of information on upcoming events and travel by our senior management, then I will come to the room and then I will go online for colleagues joining us that way.

So, first, on the Managing Director events and travel, Christine Lagarde and our first Deputy Managing Director, David Lipton, will attend the G20 Summit in St. Petersburg on September 5th and 6th, so that's next week; the Managing Director will then travel to Italy to attend the Ambrosetti forum, that's going to be September 7 and 8; and then on September 10, she will open a conference in Paris that's jointly organized by the IMF and the French Finance Ministry on the topic of designing a European fiscal union, lessons from the experience of fiscal federations.

In addition to St. Petersburg, David Lipton will be in Basel September 7th -9th to attend BIS events, that's the Bank for International Settlements; and our Deputy Managing Director, Min Zhu, will attend the summer Davos in Dalian, China, that's September 11 to 13. Let me also take this opportunity to inform you that we will release our latest Finance and Development Magazine on the September 2013 issue, it will be released at noon today. It focuses on the challenges of natural resource management, and I recommend it to you.

Finally, the press registration for the annual meetings is now open, I encourage you and colleagues in the press to visit the website and register, and we look forward to seeing you at our annual meetings in the, in a month or so. With that, let me come to the room and say good morning to all colleagues. Any questions?

QUESTIONER: Good morning. I was wondering if you could speak a bit more about what Lagarde talked about in the speech in Jackson Hole in terms of providing possible credit lines to emerging markets as they deal with the fallout from QE pull back or potential fallout. Are there any specific countries that you're in touch with or that you're thinking about? I mean, of course, they have to ask you, but if there's any more updates about that. Thank you.

MR. RICE: Yeah. The question refers to the speech that the Managing Director, Christine Lagarde, gave a few days ago at the Jackson Hole symposium, which I recommend to you, by the way, if you haven't seen it. There was a section of the speech where the Managing Director noted that, even with the best policy efforts in terms of monetary policy, it's good to have further lines of defense.

And, here, and just referring to the speech, the Managing Director gave the example of swap lines along the lines provided by Central Banks earlier in the crisis, that they can help, and she indicated that the Fund, for its part, of course, stands ready to support our members through our policy advice and through financial support, including on a precautionary basis, through various instruments. There are no specific countries in mind.

QUESTIONER: I'd like a bit of follow up, talking about the major markets, I would like to have your opinion on the situation in Latin America, especially (inaudible) Mexico, (inaudible) economy of being downgraded, its forecast, and there is quite an uneasiness about the eventual winding down of the QE here in the states and its effects. So I'd like to have the opinion of the IMF about this situation.

MR. RICE: Well, just maybe stepping back. I mean, all these countries are, of course, very different and require customized policy responses, but as you know, we saw earlier this summer some turbulence as markets adjusted to the possibility of reduced monetary accommodation or tapering of asset purchases by the Fed as the United States economy shows signs of sustained recovery. The situation stabilized for a while, but we have recently seen recurring volatility, and again, with markets differentiating across countries.

In terms of the Fund's view, we're assessing the situation obviously, monitoring it, monitoring global market developments closely. Again, all countries are different, policy responses are different, but I think what is key and what the Fund has been advising is that countries focus on policies on the fundamentals that are needed to promote stability and to promote growth. So I won't go into the specific details of the countries you've mentioned, but I think this emphasis on the policy fundamentals is key.

If there are no questions at the moment in the room, let me go to a few that are online and may be of more general interest.

According to reports, the troika is considering a big overhaul of Greece's privatization program that would move most of the state owned real estate into a holding company managed by foreign experts. Do you have any comment on this?

What I would say is that the privatization element is a very important component of the Greek program, so it's important that it moves forward. I think, as we have said consistently, and I think the European partners have said this consistently, the ownership of that program by the Greek government is essential. In terms of the reports that are being referred to, I don't have any specific details on that.

Maybe just moving to a question that we have on Portugal: Regarding the data supplied by the Portuguese government containing incomplete data about wages and the real wage cuts in the Portuguese economy, will the IMF reevaluate its conclusions about the wage flexibility defended for our country? And, if not, why?

On that, I think what I'd like to say is that, of course unemployment remains a major concern in Portugal, despite some recent positive data. It's a major concern for the Portuguese government; it's a major concern for the IMF. We continue to discuss this issue with the authorities, including a wide list of possible policy options to improve labor market outcomes, to improve employment and jobs, and we're hoping, we look forward to continuing this dialogue on labor and product market reforms with the government and our European partners during the upcoming 8th and 9th review of the Portugal program. Again, it would be combined 8th and 9th review, and I can tell you that's expected to take place in mid September.

Now, on the specific question of the data supplied by the Portuguese government, I can say that staff did request this particular wage data used by other researchers before, and this data was provided by the government to illustrate the degree of nominal wage flexibility in the current economy, and we are now reviewing with the Portuguese authorities the completeness of this specific data set. In any event, our assessment about wage flexibility is not based on any single piece of data or evidence, but rather on a much broader set. That's the status of that particular issue.

I see I’ll take one more and then I'll come back in the room: Russia has been revisiting its growth projections downward. How likely is it, in your view, that the growth will turn negative in the medium term? What will be the decisive factors? If oil price, then what level would you expect the growth to become negative?

I think the best thing I can do in trying to respond is just to go back to the statement that we made at the conclusion of our most recent Article IV mission in Russia, this was in the latter part of June, so let me just read, actually, from it, I just pulled it out.

Indeed, Russia's growth has slowed, while inflation remains high. We project growth at 2.5 percent in 2013, and 3.25 percent in 2014. And I'm just quoting from the concluding statement, here. "Ambitious economic policy reforms are necessary to realize the Russian economy's medium term potential, and reduce its vulnerabilities." Andrei had asked about the oil price. Again, quoting from the concluding statement.  "Russia could be affected by the sharp decline in oil prices or an acceleration of capital out flows if global economic and financial conditions worsen at the same time. Russia is better equipped to handle such shocks than previously, given a more flexible exchange rate, improved crisis management capacity and narrower balance sheet mismatches."

It's a two and a bit page document, it was released on June 18th, and for further information on Russia, that might be the best place to look.

QUESTIONER: The Europeans have been talking a lot about a third bail out for Greece, and I was wondering if you'd like to jump into the fray and comment at all about what you see as the prospects for that. Of course, it's very early, but Mr. Schäuble decided to and then a quick question on India, but I can ask that after.

MR. RICE: Okay. Let's come back to your second question. Look, on Greece, let me take the opportunity to clarify. Greece's current program with the IMF started in March 2012, and it ends in 2016, so the period 2014 to 2016 is already part of the IMF program and there are no discussions regarding a new IMF program. So, you know, there's not much new here to report.

If I can help clarify anything else on the Greek side?

QUESTIONER: I guess the idea behind it is because of the financing cap rate, I guess that's kind of an additional chunk of money. I don't know if you want to call it a new program or just more money for the current programs, so whether you think that's a possibility.

MR. RICE: Well, again, as I said, no discussions on a new IMF program. On the financing issue, maybe just a step back. And, again, this is not new, we've said it here a number of times before. The European partners via the Euro Group have committed to provide adequate support to Greece during the life of the program and beyond, provided that Greece fully complies with the program. Now, in our next review, we'll discuss developments on that front and see where we are. The numbers, of course, could change the direction, and that's why we keep this under continuous review, we do this four times a year.

But let me just, again, reiterate, we've said it here before, the program is fully financed through the next 12 months.

QUESTIONER: And any more updates on the next review mission if it's going to be before or after September 22nd?

MR. RICE: I don't have a date for you yet for the next review, so we'll come back to you probably in the next few weeks or so with that timing.

QUESTIONER: Okay. For India, the rupee has fallen quite precipitously and there's a lot of speculation about India coming to the IMF, possibly selling its gold reserves to the IMF to prop up its currency. I was wondering if you've had any discussions with India about supporting its economy, or advice, or anything like that? Thank you.

MR. RICE: Well, I wouldn't want to speculate on any support or program needs. But maybe just stepping back on the situation in India, the combination of large fiscal and current account deficits, high and persistent inflation, sizable unhedged corporate foreign borrowing and reliance on portfolio inflows are longstanding vulnerabilities that have now been elevated as global liquidity conditions tighten, and this clearly has affected market confidence.

The current situation presents a challenge, obviously, to the government of India, but also an opportunity for the government to continue in its policy efforts on a variety of fronts.

QUESTIONER: Any updates on Egypt, even talks with the new government so far, or how is the situation right now, the relationship between IMF and Cairo?

MR. RICE: You know, we are obviously monitoring the situation very closely, we continue to have, our contacts are ongoing, but no new news, really, in terms of specific activity there.

QUESTIONER: How concerned is the IMF that the conflict in Syria is going to lead to a rise in oil prices, and if that should happen, how well positioned is the global economy and expansion to withstand that? Thanks.

MR. RICE: You know, I don't have anything to offer in terms of the Syrian situation. Oil prices generally are something that we keep a close eye on, as part of our global surveillance, and, again, we're watching global developments, economic developments right now. I think we will have a more precise assessment for you in the coming weeks, as the situation evolves. And just to remind that, at the time of the annual meetings, in the run up to the annual meetings, we will have our world economic outlook with our updated forecasts and an updated assessment on this issue.

QUESTIONER: Japan has just now faced to increase the tax program to make sustained finance. Do you have, is IMF concerned about this decision of the administration?

MR. RICE: Thank you. I think your question is on the planned consumption tax increase?


MR. RICE: And let me just say that, as we've said before, the planned two-step increase in the consumption tax is a critical first step for fiscal consolidation to maintain confidence in public finances in Japan and to avoid potential interest rate spikes, which would be damaging to growth.

Okay, I think we've exhausted the room, and we've even exhausted the online questions, so let me thank you for coming today, thanks to our colleagues online, I look forward to seeing you in a couple of weeks. And for those of you in the United States, I hope you can enjoy the Labor Day weekend.


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