Transcript of October 2019 Asia and Pacific Department Press Briefing

October 18, 2019




CHANGYONG RHEE, Director, Asia and Pacific Department, IMF

ODD PER BREKK, Director, Asia and Pacific Department, IMF

ANNE-MARIE GULDE-WOLF, Deputy Director, Asia and Pacific Department, IMF

KENNETH KANG, Deputy Director, Asia and Pacific Department, IMF

JONATHAN OSTRY, Deputy Director, Asia and Pacific Department, IMF

KEIKO UTSUNOMIYA, Senior Communications Officer, Communications Department, IMF


MS. USTSUNOMIYA: Good morning, everyone. Welcome to the press conference for the Asia Pacific Department. I am Keiko Ustsunomiya from the Communications Department.

Here with me are Mr. Changyong Rhee, Director of the Asia Pacific Department and his deputies, Mr. Ken Kang, Mr. Jonathan Ostry, Mr. Odd Per Brekk, and Ms. Anna-Maria Gulde-Wolf.

Changyong will give you short opening remarks and then we will take questions from the floor and online. Thank you.

MR. RHEE: Thank you, Keiko. Good morning in D.C. and good evening in Asia. I am pleased to share our assessment of our economic outlook for the Asia Pacific region. Let me start with key summaries first.

In line with the slowdown of global growth, the growth in the Asia Pacific region is expected to be the slowest since the global financial crisis in our context of prolonged global uncertainty. But despite this slowdown of growth, Asia still remains the most dynamic region in the world accounting for more than 70 percent of the global growth in 2019.

A main policy priority is to address the cause of policy uncertainty and restore the lines on the multilateral trade system. Meanwhile, near term policies should support growth where necessary but also safeguard financial and fiscal stability.

Let me elaborate on this starting with the economic outlook. As Managing Director Kristalina Georgieva stated yesterday, the world economy is experiencing a synchronized slow down in a context of trade and geopolitical tensions. Asia is no exception to the trend and actually Asia was hardly hit by this trend. Growth softened in the first half of 2019 driven by a large decline in fixed investment and export.

Looking ahead, Asia is expected to grow at 5.0 percent in 2019 and 5.1 percent in 2020 which is the slowest growth pace after the global financial crisis.

Meanwhile, inflation across Asia is projected to remain subdued reflecting softening demand. In China, growth is expected to decline moderately to 6.1 percent in 2019 and 5.8 percent in 2020. This will reflect China's ongoing transition to a more sustainable growth model and the negative impact on ongoing trade tensions.

In Japan, the economy is projected to grow at 0.9 percent in 2019 and to moderate to 0.5 percent in 2020. Temporary fiscal support can cushion the expected decline in private consumption after the October consumption tax hike, consumption tax hike.

In India, following a marked slowdown in the last two quarters, the economy is expected to grow at 6.1 percent in this fiscal year, 2019 picking up to 7.0 percent in 2020. The monetary policy stimulus and the announced corporate income tax cut are expected to help revive investment.

In Korea, growth has been revised down to 2.0 percent in 2019 and 2.2 percent in 2020. Exports have been falling but fiscal possibly report and low interest rate are cushioning the slowdown.

Hong Kong SAR. The declining growth is expected to continue in the near term as the U.S. China trade tensions and the domestic socio-political situating effect on exports.

Turning to ASEAN, the economic growth has softened a bit in the first half of 2019 given weak export but growth is projected to be resilient at around 4.6 percent in 2019 and 4.8 percent in 2020.

For the Pacific Island countries, growth has been generally firm and that is the region where we revised upward unlike others, mostly thanks to the gross rebound in PNG after last year's earthquake.

The risks to our recent projection are still skewed downward. First, the announcement of trade related understanding between the U.S. and China last week in D.C. is a real -- is good news and beneficial for growth but still there is a lot of uncertainties and the possibility of further intensification in trade tensions which I hope not happening, is definitely a significant downside risk.

A second risk is a faster than expected growth slowdown in China. If it happens, this could have a significant spillovers in the region given close trade links between China and Asian countries and the close integration of Asian economies in global value chains through china. In addition, there could be a considerable financial spillovers for the China slowdown.

Third, even though the benign global conditions currently is helping to mitigate capital outflow pressure from the region, but if trade tension escalate or market sentiment change or tightening of global financial conditions will make Asian policy makers to face difficult choices.

In this context, policies need to be supported but mitigate our long term vulnerabilities. Near term policies should support growth where warranted. Fiscal policies should support domestic demand where there is a need and also there is fiscal space.

Monetary policy should be gradually -- should be generally accommodative depending on local circumstances where there could be a rising financial stability risk due to low interest environment, financial sector policies should be strengthened.

Finally, Asia needs to push ahead with the structure reform to forge their resilience and lay out the foundation for sustainable and inclusive economic growth. With this I will be happy to answer your questions.

QUESTIONER: Two questions if I could. Changyong, you mentioned fiscal policy. Do governments in Asia have a role to play in rolling out fiscal stimulus to support world growth?

And the question then for Odd Per on Japan. How much fiscal space does Japan have? Thank you so much.

MR. RHEE: Let me answer first. My answer should depend on country specific, then I will ask Odd Per to answer Japan cases.

The -- whether the country has a fiscal space or not is controversial, and then also is not

one size fits all. For example, we believe India still has limited fiscal space so they have to be careful. We support their corporate income tax cut because it has a positive impact on investment. But on the other hand, India has to address continued fiscal consolidation and secure their long-term stability of the fiscal conditions.

On the other hand, countries such as Korea and Thailand we believe there is room. Yet in the long term they have to also focus on the fiscal sustainability considering the aging and all other issues but temporarily, they can wisely use their fiscal space to, you know, offset some of the downward trends.

So which country has to use how much their fiscal space really depends on individual country specific [circumstances]. I will ask Odd Per to answer Japan case.

MR. BREKK: Since this is the first mention of Japan, let me extend our condolences to the Japanese people for the tragic loss of life and the damage in the wake of the typhoon last week. We are of course encouraged to see that the government is as always addressing this and we are always impressed by the resilience of Japan and the people.

Now, on the fiscal space, so we have in the past and we still recommend that in the case of a downturn, fiscal policy could be the first line of defense in Japan. But maybe I should elaborate a little bit because we also had the consumption tax increase.

The first one since 2014 took effect from October 1 and that is in recognition of the need for taxes to go up in Japan over time in order to create fiscal space, further fiscal space to finance the growing social security and the healthcare cost associated with aging and demographics.

So in that sense, the October 1 tax increase was a step in the right direction and we maintain our recommendation that Japan should follow these for further gradual increase in consumption taxes over time and to deal with the underlying structural issues relating primarily to demographics and that way create more fiscal space over the medium and long term. Thank you.

QUESTIONER: My question is, Dr. Rhee, you and the IMF team last week met with Chinese Vice Premiere Liu He and his team. How was the meeting and also how do you evaluate the current status between U.S. and China trade, thank you.

MR. RHEE: I may ask Ken who was in the meeting to answer this question.

MR. KANG: I can't comment specifically on the meeting itself but on your question about the status of U.S. trade tensions here, as you know as the Managing Director has said many times, there are no winners in a trade war.

Trade conflict is bad for growth, investment and jobs and for this reason, we encourage both sides to work to a durable and constructive solution that strengthens the multi-lateral trade system.

QUESTIONER: Bangladesh has been enjoying more than 7.0 percent GDP growth for the last fiscal years and the IMF also projected the country will enjoy the 7.8 percent GDP growth this year. But there are many challenges remaining in my country actually.

The countries banking sector has been facing severe liquidity crisis and they are unable to flash loan, disburse flash loan to private sector and private sector are also declining and export and import.

In the first two months of this fiscal year, declining also as you know. So how will Bangladesh enjoy the big GDP growth projected by the IMF and what are the main challenges now facing the country?

MR. RHEE: Thank you. Anne-Marie.

MS. GULDE-WOLF: Yes. Thank you very much for that question. As to outline Bangladesh has a very strong growth record in the range of 8 percent. It's one of the strongest growth not only in the region but worldwide. The economy has been outward oriented, has been based mainly on exports, exports of ready-made garments.

As you pointed out, there are problems and weaknesses especially in the financial sector. We have had serious and intense discussion with the authorities on this. We had -- we have recently concluded what is called a financial sector stability review with a focus on what needs to be done going forward on enhancing financial stability.

Financial stability is endangered by the high rate of non-performing loans in the economy. While there is no immediate crisis risk addressing this is particularly important to create room for better lending by the financial sector. This better lending will allow private sector investments, investments that are also needed to diversify the economy away from the dominant sector, and to create room for investment that is needed to benefit from the demographic dividend that Bangladesh could have.

So at this stage, again, as our previous managing director used to say is in good times you need to fix the roof, so Bangladesh is in a very good situation macro economically at this stage. And this is the time to address the structural weaknesses, especially around the financial sector.

QUESTIONER: I want to ask two questions about Korean economy to Director Changyong Rhee. Even though you've given an answer about the specific country, previously IMF had projected that Korean economy would grow 2.6 percent this year, backed by the supplementary budget, but recently cut its outlet to 2 percent. How much do you think the supplementary budget pushed up the growth?

And, secondly, the IMF recently cut Korea's growth outlook to 2 percent, but said it will grow 2.2 percent in 2020 and 2.9 percent in 2024. The outlook seems to have reflected the possibility of orderly resolution of the U.S. China trade conflict. If the trade disputes continue how do you see the growth of Korean economy?

MR. RHEE: Because of a conflict of interest I would rather first Ken to answer, and then if it's necessary to intervene later.

MR. KANG: Okay. On your question about Korea, yes, in this years' World Economic Outlook, we have downgraded growth in Korea to 2 percent this year and 2 percent next year. This reflects the following exports in response to the global trade tensions, but also sluggish investment and consumption. We also have inflation projected remaining 1 percent which is below the 2 percent target range.

On the question on fiscal policy I think we very much support the supplementary budget, as well as the expansionary budget proposal for 2020. In our view, an expansionary policy mix that includes both increased fiscal spending, but also further monetary easing is needed to address the weakness in domestic demand, as well as to bring inflation back to its target range.

In particular, on the fiscal side I think it's welcome that Korea has embarked on a fiscal expansion. By estimates, about 1.2 percent of GDP for next year if the budget is approved. Again, focused on spending to help with the vulnerable households, small and medium sized enterprises, and to adjust in job training. So I think an expansionary policy mix is very much welcome.

MR. RHEE: If I just add one thing, and clearly, there are lots of discussions why the IMF is asking for more fiscal stimulus. I think we have to really differentiate the short term and the medium term. We believe that in the short term at this moment partly due to the trade tension, partly due to the global slow down, private investment in Korea and private consumption in Korea are relatively low.

So if there's no other source for growth, you know, the economy can actually -- there can be a vicious cycle, so that is why we're emphasizing the broader fiscal policy to boost the economy in the short term. But in the longer term, I think Korea is facing aging [population] and other things so we are also saying two other things about fiscal policy.

The use of fiscal policy should be very efficient. You have to invest, use your resources to increase consumption and investment. And where the fiscal policy should be targeted is also very important. Second, over the medium-term Korea needs definitely more government expenditure for the social safety net to protect the poor people and do more infrastructure and other things. But at the same time they need more revenue because of aging [population] or other issues.

So we project that without increasing revenue in the long term, ten years later Korea's debt to GDP ratio can increase further. So, eventually, in the longer-term Korea need first to increase their government expenditure to protect the poor and build a social safety net, health and other things. But at the same time, Korea needs to increase its revenue in order to avoid, you know, a rapid increase of debt. So what we are advocating at this moment is a more short term stimulus, and then also to secure the long term sustainability of the fiscal positions.

QUESTIONER: World Bank President did say that the world has exhausted the two options of (inaudible) for monetary policy and fiscal policy adjustments or support which were two among the five priorities of the IMF Managing Director. So you mentioned about structural adjustments which is politically very difficult in developing countries. What would be the best course in that scenario for, particularly, emerging economies?

MR. RHEE: Let me answer to your question about this limit of the monetary policy and fiscal space, and then I'll ask my colleague Jonathan to answer about the difficulty of structural reform because he just did a really excellent report about the political cost of the structural reform.

In terms of monetary policy, as you heard this week we also believe that the monetary policy should not be overburden, given, especially in advanced economies given the fact that the interest rate is too low too long. There is a certain limitation that world can rely on the further monetary policy to stimulate the economy. But at this moment we also believe that it's not a time to tighten the monetary policy given the low growth evidence.

So what we are discussing is what kind of other policies to supplement monetary policy, and then also to minimize negative side effect of too low too long policies. So we are thinking about what kind of macro prudential policies can supplement monetary policies, and what should be the role of the, you know, fiscal policy if they have fiscal spaces to help these things.

At the same time, what kind of micro regulation can be used to mitigate, you know, this situation. So in terms of short term macro policies we have to find in a certain good policy mix to address this issue, and that is, I think, what our Managing Director's mentioned. As for the structural reform, let me ask Jonathan to add.

MR. OSTRY: Thank you, Changyong. So thank you for that question on structural reform. Indeed, the difficulty that you mentioned for developing countries to pursue structural reform is apparent in the data because what we have seen in recent years is a leveling off in the extent to which developing countries are pursuing liberalization policies to actually boost the supply side of the economy and allow market forces to bring about more sustained increases in productivity which are the key to longer term growth. So this is an issue.

What we have tried to understand is whether there are political impediments to pursuing structural reform. There is a famous often quote by Jean-Claude Juncker that goes something like ”We all know what to do. We just don't know how to get reelected once we've done it.” And this speaks to the perception that structural reforms entail a political cost in the short term. What we tried to ascertain was whether there are strategies for pursing structural reform that could minimize those costs, whether real or imagined.

Now, as Anne-Marie mentioned earlier one of the lessons from this empirical study is that countries really should take advantage of good times to do the hard work of structural reform. That's because there are winners and losers in any reform effort, and the losers are going to lose actually more if you're in tough economic conditions then if you're in a sort of good economic time. So that's lesson one.

The other is that governments should pursue -- should reinvigorate their structural reform efforts early in the electoral cycle because the benefits of reform tend to accrue over time, but the costs for losers might be concentrated in the short term, and if those costs are sizable those losers can be vocal and can undercut the reform process.

QUESTIONER: From Thailand. Projected growth of IMF report on the economy of Thailand is 2.9 percent this year which is quite low when compared with other countries of ASEAN. Why is that and what's the policy you like to recommend to Thailand to have stronger growth? And the slower growth then expected of China how does it effect ASEAN, as the whole region?

MR. RHEE: You know, if you look at the (inaudible) what kind of Asian countries are suffering more at this moment, I can easily say that if country depends heavily on export, investment, especially manufacturing, then those countries are suffering more at this moment because of trade tension and growing uncertainty in the global economy.

So Thailand is not exception. Thailand's import and export count close to 70 percent. Thailand’s tie with China and trade's very strong, so Thailand, like Singapore, Hong Kong, Korea, those countries with manufacturing-based, export-based, and, you know, those countries are now more hardly hit. So how to revamp your growth, I would ask Ken to answer those questions.

MR. KANG: So I hear a question about Thailand. You're right, growth has slowed. It was around 2.6 percent in the first half of this year, and as Changyong mentioned, the slowdown is very much related to the contraction in exports and the spillovers to weaker consumption from the global trade tensions which have rippled through the global supply chain to which Thailand is very much attached.

In terms of the policy mix, again, we recommend an expansionary policy mix to address the weakness in domestic demand for Thailand. Fiscal policy you want more frontloading of the public investment program that's been announced by the authorities would be helpful. In addition, given the weakness in inflation accommodative monetary policy is also needed, but also combined with macro prudential policies to address potential financial stability risks.

In addition, there is a need to push ahead with structural reforms to deal with the aging population in Thailand, and this includes policies such as pension reforms, further investment in human capital, and further investment in the regional economies.

QUESTIONER: Thank you. I'm from Bhutan. My question is with regard to the growth projection of Bhutan which is 5.5 percent in 2019 and 2020. It's projected to be one of the fastest growing, 7.2 percent. But, also, this is an increase from the initial outlook of April by almost 1 percent. So back at home there has been a slowdown in the construction of the hydropower sector which is the main driver of growth in Bhutan. So I was wondering why such a projection, despite the slowdown in hydropower construction?

And, also, Bhutan has been more focused on a balanced approach. We have been following a path of gross national happiness which is kind of maintaining a balance between growth and environmental conservation. So what do you think of this concept? Do you think it's kind of restricting the potential of the full economic growth? Thank you.

MS. GULDE-WOLFE: Thank you very much for that question. As you know, growth in Bhutan is very much dependent on exports, exports of hydroelectricity, and the hydroelectricity is going to India and the construction activity is related to investments by the Government of India. So the growth activities depend very much on implementation of these projects.

So my colleagues who were looking at the implementation and the impact on growth felt that the growth activity was stronger, somewhat stronger than at the time of the last forecast. Sometimes this is not necessarily immediately visible on the ground, but from the data we have seen that there was a pickup of that growth. So to come back to your question of how should you measure economic output in Bhutan, clearly in an economy that is export-oriented this really gives only one aspect of how the economy is doing and how it translates to the population at large.

Bhutan is the only country so far that is following the growth national happiness indicator, but we think that this is a good approach to look at inclusive and broad-based aspects of how the economy is doing. It is somewhat difficult to compare internationally, as you say, I mean, there is only -- the one country that is following this indicator, but we are looking at this with very great interest and other countries are trying to emulate or to use elements of this concept. So I think it's worthwhile indicator to look at.

More generally, looking at Bhutan and the economic outlook, we feel that, you know, some of the numbers that may look somewhat difficult in particular, the very high level of debt, you know, need to be seen in the context of the specific economic structure and that growth link to India. So the debt stands at 100 percent of GDP, but we still have estimated it in the last Article IV to be moderate. Simply because these investments in hydropower are contractual and will yield their own export revenues in the foreseeable future. We will have a team visiting Bhutan in December and we will update our numbers then.

QUESTIONER: I have two questions. One is about the just released weaker than expected China's GDP growth. Just if you can give us a general assessment of what it's suggesting about the world's second largest economy and the possible implication fallout for Asia. My second question is about climate change which has been a very prominent topic at this year's IMF meeting.

Asia has a mix of countries that are very vulnerable to the impact of climate change and big emissioners of carbon. So I'm just wondering if there is anything Asian region collectively can do to address climate change and the potential risks it could pose on the economy? And, particularly, if you can elaborate on Japan because, as you know, it's prone to a lot of disaster. It's known to be resilient, but it probably has a lot of lessons to provide in terms of how to cope with climate change and the destructions it causes. So, yeah, thank you.

MR. KANG: So I will address a question on China's GDP and the outlook. You're right the Q3 GDP numbers for China came out and they showed that growth had slowed to 6.0 percent in the third quarter, down from 6.2 percent in the second quarter which is broadly in line with our WEO baseline forecast.

In this year's WEO we forecast China's growth to slow modestly to 6.1 percent this year, 5.8 percent next year. This growth slowdown reflects several factors, including the escalation of trade tensions, the global slowdown in manufacturing and investment, but also the strengthening of financial regulations in China which would help keep growth on a sustainable path. The downward revision reflects mainly the escalation of trade tensions offset by additional policy support.

Over the medium term we project China's growth to slow gradually to about 5.5 percent, but nevertheless, China remains a very important driver of global growth, accounting for nearly 40 percent of growth in 2019.

MR. RHEE: As for the environmental issue, let me mention a few general things. You're right. I think in terms of climate change, you know, Asia is most vulnerable. Not only the Pacific Island countries. If you look at the very populated area in Bangladesh, in many other, even you mentioned Japan. Asia is definitely most vulnerable region for this climate change.

And then, also, this climate change issue is not just a global issue. In many countries we are now facing the quality of life is really deteriorating. China the air quality isn't improved, and if you look at many infrastructure, flood in Thailand, and whenever the rain comes all the traffic congestions, and even advanced economies like in Japan, you know, we are not very safe. So there is an immediate need for each country to address this issue.

Third also, historically, it is not our fault, but at this moment it's true, we cannot deny that the largest emissions are coming from Asia too. So we have to really, you know, address this issue. There are many things that countries are doing, green financing and green infrastructure investment and also carbon tax. There are several countries doing the subsidy reforms. But at the same time, I think one thing which I think the Asian policy maker has to think about, this is an opportunity to develop a new technology to leap frog Asia's growth model. And it's also a mandate because, you know, even if Asia does nothing, advanced economies tighten regulation, you know, it follow to export. And as many Asian countries are export oriented, without addressing this and introducing new technology, our export will have a more limited room to go out. And so it's both for ourselves and then for the global good. I think this is a very important issue.

And for what each country is doing, as an example I will ask Odd Per to address Japan's case.

MR. BREKK: Okay, thank you, Changyong, and thank you (inaudible).

I think like in many other policy areas, in fact Japan has been leading the charge here. And the importance of this was clearly underscored by the typhoon Hagibis just very recently. So there are lessons from Japan for other countries.

Japan, following the acceptance of the Paris Agreement in 2016, set a mid-term goal of reducing greenhouse gas emissions by 26 percent by 2030 relative to the 2013 level, and a long-term goal of reducing them by 80 percent by 2050. So Japan is taking the charge on an ambitious agenda there.

In terms of policies, already in 2012 Japan introduced a carbon pricing mechanism, the Tax for Climate Change Mitigation, TCCM, on fossil fuel in addition to petroleum and coal tax. And this tax has been gradually increased to as much as 289 yen per ton of CO2 emissions in 2016. The revenues are spent to invest in measures to expand renewable energy and enhance energy efficiency.

Japan has also put in place a range of other measures intended to mitigate the climate change. This has included prefecture level, the cap and trade mechanisms in the Tokyo metropolitan area, as well as in Saitama prefecture, and a forest environment transfer tax was introduced in April this year with the aim of improving forest management and thereby contributing to CO2 reduction.

So, again, I think Japan is leading the charge. Other countries can learn from Japan's experience and follow its initiatives in this area.

Thank you.

MS. USTSUNOMIYA: Let me take a couple of online questions. One on Australia. What do you think Australia should do to address weaker economic growth and how much emphasis should fall on structure reforms, like tax cuts, rather than more monetary stimulus? And what do you make of the Federal Government's argument that it needs to keep preserving and restoring its fiscal buffers in case of a future downturn, or should they use it now?

MR. OSTRY: Thank you for that online question.

So we have revised down our forecasts for Australia quite a bit to 1.7 percent growth this year and 2.3 percent growth next year. Macroeconomic policies in Australia have reacted appropriately in our view. There have been a series of policy rate cuts by the reserve bank, which are working their way through the system and providing welcome monetary policy stimulus, which under our baseline we believe will help get output back to trend and close the output gap and get inflation back toward the midpoint of the target.

In addition, fiscal policy has provided welcome support. We see that the current year's budget with the personal income tax cuts that it contains is providing welcome fiscal support. It is a tougher call for what next fiscal year's budget should aim for. The authorities have taken the view that there is a balance needed between longer-term debt goals for Australia and the need to provide some support. We respect the way they have assessed that tradeoff. We would underscore, however, that in the event that there were further downward shocks to growth in the future, that fiscal policy would need to be part of the answer and to provide additional support, mainly on the spending side.

I would also very much in line with Governor Lowe mentioned yesterday in his speech here at the Fund, that structural reforms are also an appropriate part of the mix to stimulate the economy. And here one can think of tax reforms, including leveling the playing field between real estate and other sectors so as to stimulate business investment, one can think of the very great potential for encouraging female labor force participation and bringing about gender equity, and one can think of also something that is entrained in Australia, the steady progress at closing infrastructure gaps.

QUESTIONER: Hi. This is (inaudible) from India.

Just a question. The IMF has been quite consistently pointing out the issues with the non banking sector within the country. What we are also noticing however is a lack of coordination among various financial sector entities, financial sector regulators because these non-banking companies have access funding from different types of companies, not just banks. How do you view this lack of coordination and the need for better coordination therefore?

And, second, if you allow me, there are certain concerns with respect to state level debt in India. How does the IMF view that going forward?

MS. GULDE-WOLF: Thank you very much.

I mean, as you already mentioned, financial sector issues are important in India and while there have been improvements that have been put in motion, including efforts to recapitalize the state banks, the issue of non bank financial institution remains partly unresolved and regulatory equity is one of the issues that needs to be achieved.

The government is aware of that. We also had a FSAP. So there are issues working at that and this is something that is why not yet fully achieved, but is entrained. While there are problems at this stage, increased attention to lending practices of non bank financial institutions continue to be very important.

Your second question on state level fiscal health, again, it's an issue that is important, that we are worried at. I mean India overall has a fairly high level of debt and fiscal consolidation needs to be a priority. However, implementing fiscal consolidation in the context of a federal system is much more complicated. The level of fiscal structural issues and challenges are different in different states.

So one of the ways in which the IMF is engaged in this question is we have a regional training institute that has started working with the individual states on strengthening fiscal management at the state level. In the context of our surveillance engagement with India, we are also increasingly placing emphasis on the need to better coordinate the fiscal state level activities and fiscal activities.

But it is a concern that the authorities are taking serious and are working at.

MS. USTSUNOMIYA: Sorry, we are running out of time. We have a couple of questions online too. Okay. Sure, please.

QUESTIONER: Thank you. Thank you.

I have a question about North Korea. I know that North Korea is not a member country and not a main subject of this week's meeting, but Mr. Kang said that North Korea -- I'm sorry, the IMF has not received any communications from North Korean authorities regarding possible engagement and is also dependent on the shareholders.

But at the same time -- first of all, I wonder if there is any updated news regarding this. And, second, at the same time North Korea has shown a sporadic interest in joining the IMF, but they always balked at the transparency rules. They might think like if we reveal too much then we will be weakened.

So I have a very fundamental question that what -- in terms of North Korea, what benefits can North Korea receive if they join the IMF? And is there any similar or any country in Asia that can be a role model for North Korea?


MR. KANG: Okay. So on your question about North Korea, you know, as you pointed out, North Korea is not a member of the IMF and any substantive engagement with the IMF and DPRK would require a request from the authorities, as well as broad support from our membership.

As an update, we have not received any such request.

While the form of engagement with North Korea would depend on the circumstances, as with many of our members, we have assisted our membership with a great deal of capacity building in several areas, including macroeconomic institutions, public management, as well as on the data issues that you mentioned.


We have run out of time. Again, thank you very much for your participation and we will see you next time.

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