Transcript of Managing Director's Press Briefing
IMF News, April 19, 2018
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- Published: April 19, 2018
Global growth outlook and forecast
- IMF forecast growth this year and next year at 3.9 percent (up from 3.7 percent in October).
- Momentum drivers:
- Stronger investment.
- A rebound in trade.
- Broad-based participation: US, Europe, Japan, China, and many other emerging and developing countries — yet not all.
Downside risks ("clouds")
- Global debt
- Global debt stands at $164 trillion.
- This is 225 percent of GDP.
- The private sector accounts for two-thirds of that debt.
- Public debt in advanced economies is at levels not seen since World War II.
- In low-income countries, if recent trends continue, many, not all, will face unsustainable debt burdens.
- Financial vulnerabilities
- Increased due to high debt, rising financial market volatility, and elevated asset prices.
- Risk: a sudden tightening of financial conditions could lead to market corrections, unsustainable debt, and capital flow reversals.
- Erosion of international cooperation, notably on trade
- Questioning of the international framework that has underpinned poverty reduction and global progress.
- Unilateral trade restrictions could dent confidence and harm investment and trade engines that are supporting growth.
Measured impact of trade tensions
- Modeling suggests the direct GDP impact of current trade measures is small — "decimals in most cases."
- More consequential is the erosion of confidence: uncertainty about trade terms and supply chains can reduce investment.
- Policy emphasis: resolve disagreements through dialogue and multilateral cooperation rather than exceptional unilateral measures.
Global Policy Agenda (GPA) recommendations (2018)
- Step up structural reforms
- "When the sun is shining, fix the roof": identify reforms to improve medium-term growth, prevent return to mediocre growth in advanced economies, and help low-income countries progress toward the Sustainable Development Goals of 2030.
- Build policy buffers
- Create more room to act when the next downturn occurs by reducing government deficits in a growth-friendly way and allowing more exchange rate flexibility where appropriate.
- Steer clear of protectionism measures
- Countries should work together to resolve trade disagreements without using exceptional measures; address domestic policies to help those affected by technological change and trade dislocation.
- The IMF role: support 189 members through analysis, advice, and offering a platform for dialogue and cooperation.
Country-specific observations and recommendations
- United States
- IMF supportive of corporate tax reform that reduces the US corporate tax rate toward the OECD average and simplifies the system.
- Recommendation: use the upswing to reduce deficits and move debt downward rather than upward.
- China
- Measures to open up (remove caps, reduce tariffs) are directionally positive; IMF will monitor implementation and delivery closely.
- Greece
- Eight years of difficult policy implementation have improved economic indicators.
- 10-year Greek bond was yesterday below 4 percent, signaling improved market sentiment.
- IMF committed to continue support and help Greece regain economic sovereignty in line with IMF policy principles.
- Egypt
- Major changes with IMF support; reforms include floating the currency, rebuilding reserves, and reducing the fiscal deficit.
- Social protection measures targeted the poor and most exposed; middle class felt effects more due to subsidy removals.
- Result: rebound in foreign direct investment and overall investment; growth rebounding.
- Brazil
- With growth picking up, IMF advises intelligent, gradual, growth-friendly fiscal consolidation to build buffers without derailing recovery.
- India
- Noted reforms: Goods and Services Tax (GST), bankruptcy law reform.
- Growth cited at 7.4 percent (one of the highest among emerging market economies).
- IMF expects more reforms, including in the banking sector.
- Separate non-IMF commentary emphasized greater attention to women’s safety and rights.
- Indonesia
- Growth above 5 percent; authorities investing in infrastructure, health, and removing subsidies to reallocate spending.
- Use of digital technologies to extend services across 17,000 islands; more than a third of the population benefiting from access to free health benefits via a smart plastic card.
- Congo Brazzaville / CEMAC
- Draft program work concluded by mission team and will be submitted to the Executive Board.
- IMF requires governance improvements to ensure proper utilization of public funds and attainment of program objectives.
- On the CFA franc: IMF supports financial stability in the zone; no specific position on devaluation given.
Technology, competition, and financial innovation
- The IMF is studying impacts of new technologies (artificial intelligence, distributed ledger technologies) on financial stability, prosperity, and the workplace.
- Concerns:
- Excessive market concentration and market power can harm medium- to long-term productivity and well-being.
- Crypto currencies: more than a hundred exist; not seen as systemic at this point, but stability implications warrant regulatory and supervisory vigilance.
- Competition policy and digital platforms
- Competition fosters productivity and innovation; too much concentration is problematic.
- Breaking up major tech firms is not presented as a clear or immediate solution given intangible assets and access issues; policy responses will require multidisciplinary thinking across competition, tax, finance, sociology, and behavioral economics.
IMF convening and surveillance role
- IMF will use Spring and Annual Meetings and bilateral sessions to encourage dialogue among finance ministers and central bank governors.
- Surveillance will step up on governance and corruption issues during annual surveillance and program monitoring; IMF will work within its competence to increase vigilance where needed.
- The IMF emphasizes multilateral dialogue as a way to address international tensions and protect engines of growth.
Transcript of Managing Director's Press Briefing, Washington D.C., April 19, 2018 — IMF Communications Department