Transcript of April 2023 World Economic Outlook Press Briefing

April 11, 2023


Pierre-Olivier Gourinchas, Economic Counsellor And Director of the Research Department

Petya Koeva Brooks, Deputy Director, Research Department

Daniel Leigh, Division Chief, Research Department

Moderator: Jose Luis de Haro, Communications Officer

Mr. de Haro: So good morning and welcome everyone. It is so good to see a full house here with us today. Also we want to thank and to welcome those people that are joining us online. I'm Jose Luis de Haro with the Communications Department at the IMF. We are here today for the introduction and the launch of the latest edition of the World Economic Outlook. If you haven't had access to the flagship yet, I would recommend you to visit our website,, and there you will be able to get the latest document, the full document but also other assets, like the blog authored by Pierre-Olivier, and the data that is underlying some of the charts and tables of the WEO. I think that this is going to be very helpful for your reporting.

Here with us today are Pierre-Olivier Gourinchas. He is the Economic Counsellor and the Director of the Research Department. Also with us today, Petya Koeva Brooks. She is the Deputy Director of the Research Department. And Daniel Leigh, he is the Division Chief also At the Research Department.

Pierre-Olivier is going to start with some opening remarks, and then we will proceed to take your questions. I want to reiterate that we will be also taking questions from those reporters that are joining us online, and I want to remind everyone that there is simultaneous interpretation for the press conference, that it is on the record. Pierre-Olivier, the floor is yours.

Mr. Gourinchas: Thank you, Jose, and welcome everyone.

The global economy remains on track for a gradual recovery from the pandemic and Russia's war in Ukraine. China's reopened economy is rebounding strongly. Supply chain disruptions are unwinding while the dislocations to energy and food markets caused by the war are receding. The massive and synchronized tightening of monetary policy by most central banks is starting to bring inflation back towards its targets. At the same time, serious financial stability-related downside risks have emerged. In our latest forecast, global growth will bottom out at 2.8 percent this year before rising modestly to 3 percent next year, almost unchanged from our January projections. Global inflation will ease, although more slowly than initially anticipated, from 8.7 percent last year to 7 percent this year and 4.9 percent next year.

This year's slowdown is concentrated in economies where growth is expected to fall to 1.3 percent this year before increasing modestly next year. By contrast emerging market and developing economies are already pushing ahead in many cases with year-end growth accelerating to 4.5 percent this year from 2.8 percent last year. The recent banking instability reminds us, however, that the situation remains fragile. Once again, downside risks dominate.

First, inflation is much stickier than anticipated even a few months ago. While global inflation has declined, this reflects mostly the sharp reversal in energy and food prices, but core inflation, excluding energy and food prices, has still not peaked in many countries. It is expected to decline to 6.2 percent this year, still well above target.

Activity, too, shows signs of resilience. At this point in the tightening cycle, we would expect to see more signs of output and employment softening. Instead, both output and inflation estimates have been revised upwards for the last two quarters, suggesting stronger-than-expected global demand. This may call for monetary policy to tighten further or to stay tighter for longer than currently anticipated.

There is little evidence of an uncontrolled wage price spiral. Nominal wage inflation continues to lag price inflation, implying a decline in real wages, but labor markets are still very tight in many countries. This suggests real wages should increase, and we expect they will.

Corporate margins have surged in recent years -- this is the flip side of steeply higher prices but only modestly higher wages -- and should be able to absorb much of the rising labor costs on average. As long as inflation expectations remain well anchored, as they are now, that process should not spin out of control.

More worrisome are the side effects that the sharp policy tightening of the last 12 months is starting to have on the financial sector. We have repeatedly warned this would not be an easy ride. Following a prolonged period of muted inflation and low interest rates, the financial sector had become too complacent towards maturity and liquidity mismatches. Last year's rapid policy tightening triggered sizeable losses on long-term fixed income assets and increased bank funding costs.

The previously instability last year in the United Kingdom's gilt market and the recent banking turbulence in the United States illustrate instead that significant vulnerabilities do exist both among banks and nonbank financial institutions. In both cases, financial and monetary authorities took quick and strong action and so far have prevented further instability. Broader markets have remained calm, and volatility has been contained, including for emerging and developing economies.

Increasing funding costs and the need to act more prudently, however, may push banks to cut down lending further. In our World Economic Outlook, we explore such a scenario and find that it would lead to an additional 0.3 percent reduction in output this year. Yet, the financial system may well be tested even more. Nervous investors often look for the next weakest link, as they did with Credit Suisse, a globally systemic but ailing European bank. Financial institutions with excessive leverage, credits risk, or interest rate exposure, too up dependence on short-term funding, or located in jurisdictions with limited fiscal space, could become the next target. So could countries with weaker perceived fundamentals.

A sharp tightening of global financial conditions, sometimes called the risk-off event, would have a dramatic impact on credit conditions and public finances, especially in emerging market and developing economies. It would precipitate large capital outflows, a sudden increase in risk premia, a dollar appreciation in a rush towards safety, and major declines in global activity amid lower confidence. In such a severe downside scenario, global growth this year could fall to about 1 percent, and outcomes for ability we estimate at about 15 percent.

We are therefore entering a tricky phase during which economic growth remains low by historical standards; financial risks have increased, yet inflation has not decisively turned the corner. Policymakers will need a steady hand and clear communication.

First, with financial instability contained, monetary policy should remain focused on bringing inflation down but stand ready to adjust promptly as financial developments might demand. A silver lining is that the contraction in bank lending could partially mitigate the need for further monetary policy tightening, but any expectation that central banks will prematurely surrender the inflation fight would have the opposite effect, lowering yields, supporting activity beyond what is warranted, and ultimately complicating the task of central banks.

Fiscal policy can also play an active role. By cooling off economic activity, a tighter fiscal policy would support monetary objectives. Appropriately designed fiscal consolidations can help rebuild much-needed fiscal buffers and help strengthen financial stability, something that we explore in Chapter 3 of our World Economic Outlook.

While fiscal policy is turning less expansionary in many countries this year, more could be done to regain fiscal space. Regulators and supervisors should strengthen oversight to ensure any remaining financial fragilities don't morph into a full-blown financial crisis. For emerging market and developing economies, this also means ensuring proper access to the global financial safety net, including the IMF's Precautionary Arrangements, access to central bank swap lines where relevant, and foreign exchange reserves. Exchange rates should be allowed to adjust as much as possible unless doing so raises financial stability risks or threatens price stability in line with our integrated policy framework.

Our latest projections also indicate an overall slowdown in medium-term growth forecasts. Five-year-ahead growth projections declined steadily from 4.9 percent in 2011 to 3 percent this year. Some of this decline is predictable. Growth slows as countries converge, but some of the more recent slowdown may also reflect more ominous forces – the scarring impact of the pandemic, a slower pace of structural reforms, as well as the rising and increasingly real threat of geoeconomic fragmentation, leading to more trade tensions, less direct investment, and a slower pace of technology adoption and innovation across fragmented blocks. A fragmented world is unlikely to achieve progress for all or to successfully tackle global challenges such as climate change or pandemic preparedness. We must avoid that path at all costs. Thank you.

Mr. de Haro: Thank you, Pierre-Olivier. Before we open the floor to your question, just some ground rules. If you want to ask a question, raise your hand. Wait until I call on you, and if I do, please identify yourself and the media outlet you represent. Try to restrict to just one question. There is a full room, and we want to answer as many questions as we can. Also, I want to remind that Pierre-Olivier, Petya, and Daniel are going to be answer questions on regions and country-specific questions related to the outlook. Then later this week, we will have regional press briefings where other issues when it comes to regions and countries can be tackled.

With this said, I think that we are going to start here on the right with David, Reuters.

Question: Thank you, Pierre-Olivier. You mentioned a lot about the financial risks that we are facing, and the WEO itself goes into two separate scenarios, sort of a milder downside scenario and then a really bad one that is more of a financial crisis. I'm just wondering if you can sort of tell us just how likely we are to see these events happening given the heightened sensitivity that markets now have to stress in the banking system and the nonbank system and then what effects you might see once we have that on emerging markets particularly. How bad will it get for them? Thank you.

Mr. Gourinchas: Well, so we do explore, as you point out, in our report, both we have a baseline scenario, and then we have a plausible alternative scenario where we take into account the contraction in bank lending that could be coming as a consequence of the financial turbulence we had in the last month; and then we have a more extreme scenario where we try to quantify what would be the effect of a full risk-off event with a large impact, especially on emerging market and developing economies.

To answer your question, when we do the assessment of the probability distribution, if you want, of the outcomes, we find that reaching something like a 1 percent growth rate for global output, which would be a very, very low growth rate by historic standards, something that we have only had maybe five times in the last 40 years or so, has a of about 15 percent. That sort of gives you a sense of the likelihood, if you want.

More broadly, the point I want to make here is that we have had somebody turbulence in the last month, and the authorities have responded very strongly, very forcefully. Some lessons have clearly been learned from the global financial crisis, and also we should point out that the banking system in particular is in a much better health overall, even if there are pockets of instability, than it was 15 years ago. So all of these are good things, and they have been useful in helping to contain the risks that we are facing. But we do recognize that there is a certain amount of nervousness in the markets right now; that there are maybe some lurking vulnerabilities, and this is why it is very important at this point for financial supervisors, regulators, authorities, to go and look very carefully at these pockets of vulnerability that might still exist, whether in the banking sector, in the nonbank financial institutions, and more broadly.

Mr. de Haro: Okay. Let's move to this side. First row. FT.

Question: Thank you. From the Financial Times. You recommend to policymakers that they should stay the course on monetary policy and fiscal policy unless things get really bad. Can you define what really bad is, and how close did we get in early March.

Mr. Gourinchas: Well, we have had a lot of topics around this very topic, as you can imagine, in the last few weeks, and we are still debating it internally. The way I would articulate it, and the way we articulate it in our World Economic Outlook, is that our assessment at this point is that the financial risks appear reasonably well-contained, and given that they're reasonably well-contained, it makes sense for monetary policy to stay focused on its price stability objectives; and financial instability that emerges, whether it is an individual bank or individual financial institutions, can be addressed with financial policies, liquidity facilities or interventions. For instance, in the US we had deposit insurance coming in. That allows monetary policy to remain focused on the price stability objective.

If we were to find ourselves -- and let me be very clear, we are not in this situation -- if we were to find ourselves in the situation of systemic financial crisis, maybe even beyond the adverse scenario that I described to you a minute ago, then it is very clear that objectives of financial stability would take precedence over price stability in the near term. It doesn't mean that you would abandon any nominal anchor, but it means that in the near term you would have to put financial stability first.

Where is that transition where you go from one to the other? It is a bit of a fuzzy area as you can imagine, and it is one we are exactly trying to think about more carefully. Our assessment at this point is we are not near at all that sort of transition region. So monetary policy needs to stay focused on price stability. There is a very important reason for this, which is that if at this point central banks were to pivot away from price stability, then there is a chance that the fight against inflation would not succeed. Inflation expectations would stop rising, and inflation would be even more persistent. That in itself is also a source of macroeconomic instability. That would feed even potentially later on into financial instability as well, so we would not be gaining on any front.

Mr. de Haro: Okay. We are going to go first row, and then we will move to the side.

Question: Good morning. So the question is about Russia. IMF has erased the estimated growth for the Russian economy this year and adjusted for 2024, although it is still expected to grow 1.3 percent. So simultaneously, the IMF sees double-digit shrink in oil prices this year and still some correction in 2024 for 5.8 percent. So in this case, what are the driving factors for the Russian economy to grow for these two years? Thank you.

Mr. de Haro: Pierre-Olivier before we answer, there is another question on Russia on WebEx, but I will formulate the question on the reporters we have.

As the IMF increased the projection for Russia's GDP in 2023 to 0.7 percent but decreased in 2024 to 1.3 percent, I wonder what are the reasons for such changes? Are they related to the actions of the Russian authorities.

Mr. Gourinchas: So let me provide some elements, and then I will turn it over to my colleague Petya here.

On Russia we have, indeed, revised upwards our projection for 2023 to 0.7 percent. That is an upward revision by 0.4 percentage points. And we revised downward for 2024 to 1.3 percent. That is a downward revision by about 0.8 percentage points. What is our understanding of what's happening with the Russian economy here.

One thing we had in 2022, and we are going to get less of it in 2023 and possibly into 2024, there was a very strong source of revenues for the Russian economy from energy exports, very, very high energy prices, and that helped support economic activity. In addition to that, there was a very strong fiscal impulse in Russia in 2022 and continuing into 2023. But if we look forward, what we see is we see, as you pointed out, oil prices declining. We have seen that the price of the oil sold by Russia in some cases has been substantially marked down compared to other oil index indices. We anticipate that the revenues will actually be coming down. The revenues feed into fiscal revenues as well, so that will make the fiscal situation a little bit more complicated from the point of view of the fiscal authorities, and that goes into some of our projections for 2023 and 2024. Petya.

Ms. Brooks: Thank you. Just to add a few thoughts here. It is also important to think about where growth was last year, which was at -2.1, so in a way the recovery that we see this year is partly just the base effect of that. And in addition, we saw very strong fiscal stimulus, a lot of it related to defense expenditures in the second half of last year, so the impact of that is also expected to carry over this year as well.

Now, all of that being said, in the medium term, we are still projecting potential growth to be significantly lower than it was pre-war, at about 0.8; and at the same time the level of output in the medium term, we are expecting it to be lower by 7 percent all together. Thanks.

Mr. de Haro: We are going to move to this side. The Guardian.

Question: You say in the WEO that you've seen no signs of a wage price spiral, but what we are seeing are widening corporate profit margins, so is that IMF speak for greed-flation on the part of the corporate sector which is using higher inflation as an excuse to drive through higher prices and gouge their customers?

Mr. Gourinchas: So what we have looked at is the decomposition of the increase in prices, and you can look at it from a sort of an income source perspective; and when do you that, this is where you see that the increase in unit labor cost is only part of it, and you have the substantial part of the increase in prices, especially GDP deflator, that is coming more from the corporate side. This is not ascribing motive to why that is an important component. What you have here is a situation where you had a very strong surge in demand. There is a strong aggregate component to the surging inflation that we have seen; and in a context in which there was still limited supply -- we had supply disruptions and things like that -- especially in goods sectors first, but then services were also affected. Then you have sort of a natural response of the economic system is that prices will rise to adjust.

Wages tend to take some time to adjust because they are typically adjusted less frequently than prices, and so that is why we anticipate that we are going to have some of this catchup going forward.

Mr. de Haro: Okay. We are going to go right now to WebEx for a second. I think our colleagues from NHK are ready to ask a question.

Question: Good morning. Do you think you could explain why in 2022 projections fell by more than all other advanced economies since the January update (inaudible).

Mr. Gourinchas: Yes, we had in the context of Japan, and I will then turn it over to my colleague Daniel here. We had a relatively disappointing last quarter of the year, and so we had a downward revision both for 2022 to 1 percent, and there is a carryover to 2023 in the context of relatively weak investment. So this I think is one of the drivers of the numbers, the revision in numbers that we have. Daniel, over to you.

Mr. Leigh: Yes, as you said, the last quarter of 2022 was more disappointing, especially on private investment. There was some uncertainty connected with the volatility of the yen, and that has a knock-on effect also on 2022 and 2023, which is why there is a downward revision there. At the same time, if you look at the forecast of growth, it is going up for Japan, from 1 percent in 2022 to 1.3 percent in 2023, and this reflects the supportive monetary policy in particular. The inflation rate is also starting to go up, but its very low by international standards, and that is why there is still this monetary policy support, which we support as well.

Mr. de Haro: We are going to go to the left, Sky News.

Question: Thank you. Six months ago the UK was one of the big talking topics here in Washington after the mini budget and what was happening in the gilt market. I wonder six months on whether what has happened since is cautionary tale, or have things actually, is it an exemplary case in what to do when you are faced with a crisis like that? How is the UK doing right now?

Mr. de Haro: Before we reply, there is another question from Bloomberg news on the UK:

Can you explain why the IMF still expects the UK to be one of the worst-performing economies? Fiscal risks have receded, and recent economic data has been resilient.

Mr. Gourinchas: Thank you. So on the UK, first on the financial part, the brief instability in the gilt market, it is certainly the case that there was forceful action by the Bank of England, and it was able to calm the markets very quickly. It is one of the episodes we have had of this rapid increase in interest rates, creating some pockets of vulnerabilities in the financial sector, in that case in vehicles that were associated with the UK pensions.

Certainly, as we have seen also in the US, forceful action from financial and monetary authorities was very decisive here.

On the UK numbers, let me point out that, first, we have had a stronger first quarter of the year in the UK; and, in fact, we have had an upwards revision to our projections for 2023. It is still negative, negative 0.3 percent, but it is an upward revision by about 0.3 percentage points. We are seeing a little bit better performance for the UK economy. There is slightly less fiscal contraction in the pipeline, as we interpret it, but at the same time there is also the effect of tighter financial conditions, which we expect to see playing out in a number of countries.

Now, some of the reasons why in terms of levels the UK economy seems to be doing a little bit worse than some other comparable economies have not been different from our previous analysis, which is basically there is a higher dependence on imported energy with the high share of gas and with the gas prices we had last year, it is a major negative terms of trade shock. It is a fairly tight labor market, and so there has been a need for a fairly aggressive tightening of monetary policy; and there is some, already some signs of the transmission of this monetary policy to the broader economy. Let me ask Petya to complement this.

Ms. Brooks: I don't have anything to add.

Mr. de Haro: We are going to go to a third row here.

Question: Yes, thank you very much. Pierre-Olivier, I would like to ask about the outlook for distressed debt in low-income and developing countries. We have seen a growing need for and growing demand for IMF financing, IMF assistance; and I wanted to ask about the vulnerabilities there in an environment of high and rising interest rates, whether the IMF has quantified in terms of the amount of support that will be necessary or the amount of debt coming due, and if you could speak to the potential spillover effects there. Are we at the cusp of a potential broader crisis in developing and emerging markets?

Mr. Gourinchas: Yes. Eric, you are absolutely right to point out that there are a number of countries out there facing very, very severe and difficult situations, especially when it comes to sovereign debt. That is something that had started already last year when we had the strengthening of the U.S. dollar. That was associated also with lots of movements in capital flows and an increase in spreads. That was not uniform. It has not been a broad selloff of emerging and low-income countries, but it has been quite differentiated but with some countries facing a very difficult situation. We are estimating at this point that we have about still 60 percent of low income countries that are in debt distress or high risk of debt distress and about 25 percent of emerging market economies are also at high risk and facing sort of default-like type of spreads.

So that is a situation that requires action, of course. There is limited, in some cases there are limited levers at the level of the countries because they have, by definition they have almost no fiscal space; and so some of these require starting discussions with creditors, maybe to think about how to reprofile or how to adjust the debt trajectory going forward. Of course, the Fund is involved in many of these discussions, and we have various vehicles to try to facilitate these kind of discussions. For instance, the Common Framework, which has been in place since 2020, has not yet been widely adopted or widely helpful but is already starting to bear fruit. We have had one case that was completed under the Common Framework. That was Chad. And then we have discussions that are underway taking quite a bit of time, but there is some progress in the case of Zambia, and then there is Ethiopia and Gambia that are also under discussions under the Common Framework.

Mr. de Haro: I'm going to take the first row here, and then I'm going to move to this side of the room.

Question: My question is about India. The growth rate for FY2024 has been down revised by 0.5 percentage points to 6.3 percent. I'm just wondering if you could comment on the reasons for this and more generally the overall outlook for the economy. And also if this is something you can answer here, the job situation, the medium-term employment and job situation and outlook for that country. Thank you.

Mr. Leigh: Thank you. Yes, we have the growth rate for India, which is 6.8 in 2022. Let us not forget this is one of the bright spots in the global economy right now, such a high growth rate, and it is moderating down to 5.9 with a -0.2 revision compared to January. What is happening here is also a set of historical revisions. We realize that 2020-2021 has been a lot better than we thought, so actually there is less room for catching up. That pent up demand from consumption that was informing our previous forecast is going therefore going to be less because they have already had more catching up before. That is why there is the downward revision this year. Then we go up to 6.3 next year, again a very strong economy, which is necessary to allow India to continue to converge towards higher living standards and create those jobs that are necessary.

Mr. de Haro: I have also questions on Argentina if you are going to ask on Argentina.

Question: Thank you. I have a question, yes, on Argentina. You are projecting a modest uptick in GDP of 0.2 percent and a drop in inflation to 88 percent annual by the end of the year. This goes in the opposite direction of private projections in Argentina. We are seeing inflation going up, and we are seeing a recession amidst the historic drought. Why are you seeing inflation going down this year in Argentina?

Mr. de Haro: I have a few questions on Argentina but on the same line of questioning. I would like to know your opinion about the situation of the high inflation, low level of international reserves and a multiple exchange rates in Argentina. And from collar reason, question about Argentina, why is the IMF down sizing the GDP projections from 2023 and what Argentina should do in order to grow.

Mr. Gourinchas: Let me say a few things, and then I will ask Petya to provide additional details.

First, on Argentina, the reason for the large downward revision for output for 2023 is very, very clear. It is the drought. It is a massive drought, and it is having a huge impact on the economy. It is expected to be transitory, so we are revising downward Argentina's growth rates for 2023, but 2024 is expected to be a 2 percent, which is sort of more or less on average.

On the inflation front, we had seen some progress, but, of course, the recent economic challenges have actually led us to revise upwards our inflation numbers for Argentina, so, yes, it is 88 percent, but it is up from before that. In January we were expecting to be coming down to 60 percent, so it is coming down a lot less. Let me hand over to Petya.

Ms. Brooks: Yeah, just maybe a couple of other thoughts. We saw when it comes to growth, we saw a fairly sharp slowdown in the last quarter of 2022, so some of that impact is expected to carry through this year; and, of course, the impact of the drought is the reason for the significant downgrade of growth for this year. So when it comes to inflation, inflation ended the year last year at 94.8 percent, which was a very large number, and we also saw the pickup in January, although part of that was because of the food prices. The underlying inflation pressures are still there, and part of that is because of the unanchored inflation expectations. So the way I would characterize our projection is that we are actually expecting inflation to stay high, to stay at very high levels, although which actually prompts the question of what has to be done, and this is where the importance of macroeconomic policies, having tight monetary policy as well as fiscal policy, which is in line with what is in the Fund-supported program, would be particularly important. Thanks.

Mr. de Haro: We are going to go quickly to WebEx. We cannot hear you. So we are going to continue here in the front.

Question: Today news in Washington, D.C. As you know Nigeria, which is the most populace country in Africa, has just undergone a presidential election won by Bola Tinubu. If you can talk a little bit about the economy of Nigeria, the projections and some of the recommendations that you make to Mr. Tinubu, who will be sworn in next month. And more generally about Africa, if you can talk about the economy in Sub-Saharan Africa and some of the recommendations that you have. Thank you.

Mr. de Haro: Before you answer, I know that we have a fellow that is also from Africa. Please go ahead and ask your question.

Question: Your projection for South African growth is at 0.1 percent, mostly linked to the energy crisis. Perhaps if you can just go a little bit deeper into that if you can. Thank you.

Mr. Gourinchas: Let me say a few words about Sub-Saharan Africa, and then I will ask Daniel to come in on Nigeria and South Africa more specifically.

Very clearly the region is suffering from a strong funding squeeze that we already discussed. Some of the countries that are facing very elevated spreads, a lot of them are in the region. A lot of the challenges come from external factors, the surge in energy prices and food prices as a consequence of the Russian invasion of Ukraine. And the tension in energy markets is affecting the region. So we have a slowing growth for the region overall to about 3.6 percent in 2023 from 3.9 percent last year. We also have a situation where inflation is elevated. It is double-digit inflation, expected to come down from 16 percent, roughly 16 percent, to about 12.3, but still double-digit inflation. Of course, a very important challenge for the region is as a result of this elevated food prices, we have a large number of people who are in situations of food insecurity. We estimate about something like 130 million people in the situation of food insecurity.

Mr. Leigh: Thank you. For Nigeria our forecast is one of the most stable ones for this year. We have a slight increase -- we have 3.3 percent in 2022. That is an upward revision. And for 2023, about the same, 3.2, 3.3 percent in 2024. This is an economy with very high inflation as well, and this is why we have a forecast of about 20 percent for 2023, and one of our main recommendations is to tighten the monetary policy to ensure that this inflation comes down towards the more target levels. That is for Nigeria.

For South Africa, this is an economy where we have a sharp slowdown to about 0.1 percent growth this year. That is a -1.1 percentage point revision, and this mainly reflects the much more severe than expected outages in the energy sector, especially in the last quarter of 2022. Next year we expect more power to come online and the growth to recover to 1.8 percent. More renewable power in particular should be connected.

On the inflation front, the inflation is forecasted to come down to inside the target range of the South Africa Reserve Bank, 5.8 percent in 2023, and then coming down 4.8 percent; so we did welcome the recent increase in interest rates to 7.75 percent. That is why we expect inflation to converge to the target.

Mr. de Haro: We are running out of time. We are going to go back to WebEx and then back to the room. Go ahead.

Question: Yes. I had a question on China. Could elaborate more on China's (inaudible) and its role in the (inaudible) global recovery in a world as mentioned that might be [threatened] by geoeconomic fragmentation leading to more trade tensions.

Mr. Gourinchas: So on China we have -- this is one of the bright news for 2023 -- the rapid reopening of the economy is leading to a strong rebound, so we are projecting 5.2 percent growth in 2023. That is up from 3 percent last year, so very clearly a very significant fact. And, of course, still some slack in the Chinese economy, so inflation pressures remain quite modest, and we anticipate that they will be mostly around 2 percent this year and next year, increasing a little bit maybe next year to 2.2 percent.

One of the risks looking ahead for the Chinese economy is, of course, the property sector. There has been some concerns already expressed last year in terms of the extent to which the property sector might weigh down on growth given the weakness we see there; and a number of measures have been implemented, but more could be done to make sure that this sector stops contracting and does not drag down growth in China going ahead.

There is also some discussion about the extent to which the Chinese reopening leads to a surge in consumption. So far that seems to be there, but it is not maybe as strong as we have seen in other countries, so there still may be a little bit of prudent behavior on the part of households and consumption. This is certainly something that is contributing overall; the reopening is contributing to global growth with positive spillovers.

Daniel, anything to add on China.

Mr. Leigh: Only about those spillovers, that so far in the region we haven't seen as big an impact as we might have expected in the past from such a strong Chinese rebound. One of the reasons this is growth rebound that is more concentrated in the domestic services than in the past where it was more investment-led, so that has a smaller impact. Also, our medium-term forecast for China is moderating, so that also means less positive spillovers to other countries around the world.

Mr. de Haro: Okay. We are going to go for the last question, we are going to go here in the front row.

Question: Thank you for taking my question. The report has downgraded Egypt's real GDP growth for the second time since October, so I want to know what are the key drivers for this downgrade. Also, I want to know your insights on the country's debt, especially that Egypt is currently engaged in an EFF program that charts a clear map to lower its GDP over the medium term. Thank you.

Mr. de Haro: We have another question on Egypt that goes kind of on the same line saying what are the expectations for the performance of the Egyptian economy during the current year?

Ms. Brooks: Egypt is, indeed, facing a very challenging outlook, like many other countries across the world, and we have downgraded the forecast for this year by 0.3 and by 0.3 also for the coming year. Part of that, the lower growth in this difficult environment is related to the external environment and the very high financing costs that Egypt is facing. At the same time, we have also seen the depreciation of the currency and its impact on the economy, as well as the continued backlog of imports, as well as a rationing of FX. All of these factors have lowered business and consumer confidence, and that is what is underpinning this lower growth this year and next.

All of that being said, we are still talking about growth being at 3.7 this year and 5 in 2024. When it comes to the engagement on policies, as you know, indeed, Egypt is being supported by a fund program, and there is preparations right now for the first review of the EFF.

Mr. de Haro: In the name of Pierre-Olivier, Petya, and Daniel and the Research Department and the Communications Department, I want to thank everyone for attending this press briefing. I want to remind you that the next briefing is going to be at 10:30 a.m. for the launch of the Global Financial Stability Report. Then tomorrow we will be launching the Fiscal Monitor early in the morning; and as I said, later in the week we will have all those regional press briefings. Thank you very much for attending. If you have any other questions or comments, send them my way to Thank you very much.

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