Transcript of January 2024 WEO Update Press Briefing

January 30, 2024

 Sandton, South Africa




Communications Department



Chief Economist and Director, Research Department


Division Chief, Research Department

* * * * * 

MR. DE HARO: Okay, I think we have a quorum, and we can start. So, I want to welcome everyone. Good afternoon. Also, I want to welcome everyone who is joining us online. I'm Jose Luis De Haro with the Communications Department at the International Monetary Fund.

We are gathered here today for the launch of the World Economic Outlook Update. I hope that you got a copy of the document already, but if you have not, I will encourage you to go to There you will find the document and I will encourage you to download it. I'm sure that my colleagues in the publishing division will be very happy. Also my colleagues in the Research Department. And there you will not only find the document, but Pierre-Olivier's blog and also the underlying data behind some of the charts in the World Economic Outlook update.

Accompanying here with us today is Pierre-Olivier Gourinchas. He is the Chief Economist and the Director of the Research Department. And also here with us today is Daniel Leigh. He is a Division Chief, also with the Research Department.

Pierre-Olivier is going to start with some opening remarks and then we will proceed to take your questions. So, Pierre-Olivier, the floor is yours.

MR. GOURINCHAS: Thank you, Jose. The global economy continues to display remarkable resilience, with inflation declining steadily and growth holding up. The chance of a soft landing has increased, but the pace of expansion remains slow, and risks remain. On the demand side, global activity was supported by stronger private and government spending, despite tight monetary conditions. On the supply side, increased labor force participation, mended supply chains, and cheaper energy and commodity prices helped, despite renewed geopolitical uncertainties. Global growth under our baseline forecast will be steady at 3.1 percent this year, a 0.2 percentage point upgrade from our October projections, before edging up to 3.2 percent next year. Important divergences remain.

We expect slower growth in the United States, where tight monetary policy is still working through the economy. And in China, where weaker consumption and investment continue to weigh on activity. In the Euro area, activity is expected to rebound slightly after a challenging 2023, when high energy prices and tight monetary policy restricted demand. Many other economies continue to show great resilience, with growth accelerating in Brazil, India, and Southeast Asia's major economies. In Sub-Saharan Africa, growth is projected to rise, as the negative effects of earlier weather shocks subside, and supply issues gradually improve.

Inflation continues to ease. Excluding Argentina, global headline inflation will decline to 4.9 percent this year, down 0.4 percentage point from our October projection. For advanced economies, inflation will average around 2.6 percent this year, close to Central Bank targets.

With the improved outlook, risks are now broadly balanced. On the upside, this inflation could happen faster than anticipated, allowing central banks to ease sooner. Announced fiscal consolidation measures may be delayed in what is the biggest global election year in history. This could boost economic activity but also spur inflation and increase the prospect of disruption later. On the downside, renewed geopolitical tensions, especially in the Middle East, with increased attacks on ships in the Red Sea, could disrupt commodity and supply chains. Core inflation could also remain high as services inflation proves more persistent and wage developments could also add to price pressures.

Finally, financial conditions could tighten, raising long term interest rates and putting renewed pressures on economies and governments. A substantial share of the recent disinflation occurred via a decline in commodity and energy prices, rather than through the contraction of economic activity brought by tight monetary policy.

But monetary tightening worked through two additional channels. First, the rapid pace of tightening convinced people and companies that high inflation would not be allowed to take hold. This prevented inflation expectations from persistently rising and reduced the risk of a wage price spiral. Second, the unusually synchronized nature of tightening lowered world energy demand and prices, directly reducing headline inflation. Central banks must now avoid a premature easing that would undo hard-earned credibility and lead to a rebound in inflation. But they must also avoid waiting too long as signs of strains are growing in interest rate sensitive sectors, such as construction, and loan activity has declined markedly in many countries.

Staying on the path toward a soft lending will not be easy. The biggest challenge ahead of us is to tackle elevated fiscal risks. Most countries came out of the pandemic and energy crisis, with higher public debt levels and higher borrowing costs. Bringing down public debt and deficits will help deal with future shocks.

First, fiscal measures introduced to offset high energy prices should be phased out right away, as the energy cris is behind us. But more is needed. The most pressing risk is that countries do too little too late. In that case, fiscal fragilities will build up until the risk of a fiscal crisis forces sudden and disruptive adjustments at great cost. In some countries, there is also a risk of doing too much too soon, and this could jeopardize growth prospects. It would also make it much harder to address imminent fiscal challenges, such as the climate transition.

What is needed is to implement a steady fiscal consolidation, with a nontrivial first installment, combined with an improved and well enforced fiscal framework. So future consolidation efforts are both sizable and credible. The opportunity should not be wasted.

Emerging market have been very resilient, with stronger than expected growth and stable external balances, partly due to improved monetary and fiscal frameworks. Yet, divergence in policy, between countries, may spur capital outflows and currency volatility. This calls for stronger buffers in line with our integrated policy framework. The pressure on borrowing cost is particularly acute for low income and developing countries, many of which are in Africa. They are being increasingly priced out of the market. This is crowding out necessary investments and hampering their recovery. These countries need to mobilize revenues, improve their policy framework, and, if they are at high risk of debt distress, work on orderly debt restructuring.

The IMF is also providing crucial financial assistance, allowing these countries to protect the most vulnerable, while maintaining economic and financial stability. This includes the temporary Food Shock Window and the Resilience and Sustainability Facility.

Beyond fiscal consolidation, the focus should return to medium term growth. We project global growth at 3.2 percent next year, which is still well below historical average. Our research shows that reforms that ease the most binding constraints to economic activity, such as governance, business regulation, and external sector reform, can help unleash latent productivity gains.

Stronger growth could also come from limiting geoeconomic fragmentation by, for instance, removing the trade barriers that are impeding trade flows between different geopolitical blocs, including in low carbon technology products that are crucially needed by emerging and developing countries for the climate transition. Instead, we should strive to keep our economies more interconnected. Only by doing so can we work together on shared priorities.

Multilateral cooperation remains the best approach to address global challenges. Progress toward that goal, such as the recent 50 percent increase of the Fund's permanent resources, is welcome.

Finally, the creation of a 25th Chair of the IMF Executive Board for Sub-Saharan Africa. The entry of the African Union as a permanent member of the Group of 20, and South Africa's presidency of the G-20 in 2025, highlight the growing importance that the region and South Africa will play in the global economy in the 21st century. Thank you. Yabong.

MR. DE HARO: Thank you, Pierre-Olivier. So, before we open the floor for questions, a couple of ground rules. If you want to ask a question, raise your hand, identify yourself, and the media you represent. And try to be concise so we will be able to answer all the questions.

Also, a reminder, Pierre-Olivier and Daniel can comment on the global outlook and also some regional and country specific outlook. But they are not here to talk about programs or negotiations or any issue related to that. So just for everybody to be aware. So if there's any question in the room, I can start in the room. I'm going to start with Godfrey.

QUESTIONER: Thank you, Jose. A couple of questions for me. I just wanted perhaps, Pierre-Olivier, to give a little bit of color to some of the key risks that he is talking about in this outlook, and what has changed since the last update in October. Given now that you're seeing what appears to be a much brighter picture for the global economy. The second part of my questions would be around the anticipated depth of the cutting cycles that everybody is talking about at a global level. Thank you.

MR. GOURINCHAS: Thank you. So let me say a few words on the key risks. One of the big difference when we look at our projections, this current round of projections compared to, let's say, a year ago, is precisely that the risks are becoming much more balanced. Back in beginning of 2023, there were a preponderance of risks to the downside for economic activity and to the upside for inflation. We were seeing maybe inflation being very persistent. There were a lot of concerns about the fact that the fight against inflation would potentially bring a recession. And one year later we are in a situation where growth has held steady and inflation has been coming down. So that's certainly, you know, a very good development.

And the risks where we are now and where we can look at them, the risks are more balanced. So we are seeing potential for, maybe, if central banks remain too tight for too long, there could be a slowdown in economic activity, or if there is tightening of financial conditions, or if there is another round of supply shocks, for instance, that could be downside to the global economy. But they can also be upside to the global economy. Inflation could be continuing to come down, back toward targets, allowing central banks to ease faster.

We could have, in the short term, we could have a little bit more fiscal slippage because it's also an election year. And so potentially there could be a little bit of fiscal stimulus more than what we would recommend -- and we can come back to that. And as a result, that would support growth as well. But that would complicate the picture on the inflation front. So we have a fairly balanced distribution of risk at this point.

On the cutting cycle, I think your question was about monetary policy and when can we anticipate that central banks might start cutting interest rates. What we are saying is we are almost there, but we're not quite there yet. And there are a number of indicators that are pointing to relatively rapid disinflation. When you look at energy prices, you look at the price of goods, for instance, have been coming down very, very fast. But other indicators point to some more persistent. The price of services, for instance, still remains quite persistent. Or if you look in some countries, wage growth is still fairly robust. And whether that will in turn lead to price growth down the line is a risk that central banks have to look at carefully.

So you put all of this together, and what we are seeing, and we are agreeing with that assessment, is central banks holding off on easing until maybe the second half of 2024. And then that's when we anticipate that the Federal Reserve, the European Central Bank, the Bank of England and others might start easing. Including the South African Reserve Bank, by the way.

MR. DE HARO: Okay, before we go again to the floor, I just want to remind everyone that we will be taking questions on Webex. And I also want to encourage all the reporters that are not here in the room to keep sending questions through our Press Center. So we go the gentleman , there.

QUESTIONER: Ed Stauder (phonetic) with South African Daily Maverick. I see, it looks to me, like you have downgraded your forecast for South Africa for this year to 1 percent, I think from 1.8 percent previously. And I'm just wondering what's the main reason behind that? And just a second question, I was just wondering how big a concern is the disruption to shipping and the increase in shipping costs right now. How much of a concern is that on the inflation front? Thanks.

MR. GOURINCHAS: Let me take the second part of your question and then I'll turn over to Daniel for the question on South Africa. So we are seeing, of course, an increase in shipping cost, maritime shipping, a substantial share of maritime shipping between Asia and Europe is going through the Red Sea and is being disrupted right now. These ships now have to go around Africa, and that's increasing cost, that's increasing delays, and that is potentially as an impact on the price of imported goods.

Yet, as of now, the impact that we see on inflation, let's say, in European economies, is fairly modest. And even though the increase in shipping costs is substantial, this isn't really translated into an overall increase of a sizable nature in inflation. What we are saying also is that there hasn't been any significant increase in the price of oil, for instance. That's another market that could potentially be disrupted.

So we haven't seen a major macroeconomic impact of the situation in the Middle East. But of course, this is a situation we are monitoring very carefully. This is something that actually, we're going to have a briefing tomorrow at 7:30 am D.C. time on January 31st on the developments in the region by our area department. And I encourage you to watch this. But so far we are not seeing major impact beyond the region. Let me turn it to Daniel on South Africa.

MR. LEIGH: Thank you. Our forecast for South Africa starts with what happened in 2023, a very low growth year in the context of power disruptions. 0.6 percent is our estimation of what growth was in 2023. But then in 2024, we see a gradual increase towards 1 percent. That is a lower number than we had in October, by 0.8 down. And the main reason for the downgrade there is that there are some additional disruptions in the logistical sectors: rail, ports. And that, combined with the continuing challenges still with the electricity production, that explains the downgrade. But as those bottlenecks ease, we see growth going up to 1.3 percent next year.

MR. DE HARO: Okay, before we come back to the room, I think that there's some reporters on Webex. I think Weier from Yicai News wants to ask a question. Please, go ahead.

QUESTIONER: I got a question on world trade and it's linkage to China. According to IMF, world trade growth is projected at 3.3 percent and 3.6 percent this year and next, below its historic average growth rate of 4.9 percent. So would you elaborate how rising trade distortions and geoeconomic fragmentations will continue weighing on the level of global trade? What does it mean for global and the regional economy in China in particular? Thank you.

MR. GOURINCHAS: Yes, so you're absolutely right. We are projecting growth rate for world trade at 3.3 percent this year and 3.6 percent. This is relatively on the low side compared to historical numbers. And what we are seeing here is we are not seeing, what I would call deglobalization, in the sense that trade would decline as relative to the size of the global economy. We're seeing a plateau. We are seeing globalization plateauing. And we see that in the context of, as has been just mentioned, very large increase in the number of trade distorting measures that have been implemented by countries. That is around 3,000 in 2023, compared to a much lower number, around a little bit above a thousand in 2019.

And, of course, these trade measures are part of the reason why trade is sort of plateauing here. And this is part of a broader context in which we have this rising geopolitical tension. So this is something that we are, of course, watching very carefully, and we've done a lot of work at the Fund on this theme of geoeconomic fragmentation, and how it might weigh down on economic output. We look at a number of channels, we look at a number of estimates, and we find costs that could range from 3 percent of world GDP to 7 percent of world GDP. But of course, these are aggregate numbers. And when we look in a little bit more detail, we also find that emerging and developing countries tend to be the ones that are most adversely affected by this rise, this increase in trade tensions and trade distorting measures.

MR. DE HARO: Okay, we're coming back to the floor. Any questions? Don't be shy, please. Please, Bloomberg.

QUESTIONER: Afternoon. Thank you so much. So my question is around the Sub-Saharan Africa region. I know that South Africa has been blamed for some of those downgrades, and I'm just wondering, just beyond South Africa, what other countries in that region are to be blamed in clouding the outlook?

MR. GOURINCHAS: Well, so let me just say one word and, again, hand it over to Daniel, who can supplement. One of the things about the Sub-Saharan African region is it's very exposed to external shocks, and we've had a number of adverse external shocks in the last few years. The Russian invasion of Ukraine, the associated energy crisis, the surge in food prices, the tightening of policy rates in major central banks around the world. That has increased interest rates and therefore increased funding cost and the cost of living crisis.

So all of these factors are common to a lot of the economies in the region, including South Africa, but not just. We are seeing some of these factors wane a little bit. So we're expecting growth to increase in the Sub-Saharan region from 23 to 24, and then increase again in 2025, to 4.1 percent. But with this, Daniel, over to you.

MR. LEIGH: Thanks, Pierre-Olivier. I don't have much to add. We do also have a forecast for Nigeria that we downgraded slightly, and that mainly reflects lower than expected outcome in 2023, in the context of the monetary tightening to reduce inflation. And mainly the external shocks in terms of high borrowing costs and that constraining domestic investment and spending.

MR. DE HARO: Okay, we're going to go with one question from the Press Center, from Felix Sassmannshausen from Neues Deutschland, and it goes as follows. Regarding the tight labor markets and high wage increases in the U.S. and Euro-zone, especially Germany, what do you expect for the coming months when the monetary policy remains at this level? Do you expect employment to increase and at what rate?

MR. GOURINCHAS: Just to make sure, if I understood the question is about the euro area.

MR. DE HARO: It's basically about -- he mentions high wage increases in the U.S. and the Euro-zone, especially in Germany, but it's related to tight labor markets and high wage increases in the U.S. and the Euro-zone. And what should we expect as monetary policy remains at this level if unemployment is going to increase?

MR. GOURINCHAS: Thank you, Jose. So I think this is an interesting question because we really see some interesting differences between the U.S. and the Euro area when we look at the underlying inflation dynamics. And that's something that we've looked into in the past in our World Economic Outlook Report.

And one of the things we see in particular is when you look at the U.S., and the Euro area, in both cases, you have part of the inflation dynamics is driven by the surge in energy and commodity prices. But much more so for the euro area. The Euro area had a much larger shock. It was basically directly exposed to the impact of the Russian invasion of Ukraine and the surge in the price of gas, in particular.

Then another difference between the two regions is that there is evidence that there's a much tighter labor market in the U.S. than in the Euro area. And that tight labor market with an employment rate that is very close to historical lows, a very strong strength of the very low number of vacancies relative to unemployment. Very high number of vacancies relative to unemployment, for a long time. This has contributed [GM1] also to the price dynamics. This is easing a little bit. We've seen some easing of the labor market pressures in the U.S., and that's helping in terms of the inflation dynamics. There's much less of that tight labor market component, to inflation dynamics in the Euro area.

So that leads to a slightly different diagnostic in terms of thinking about what might be happening in terms of inflation. In the U.S., very clearly, there is still this demand component that is there. And if that demand component doesn't go away by itself, then there could be more persistence of inflation. Central banks need to be vigilant about that.

In the Euro area, the worry for the European Central bank is more on the wage growth. It's more what we see in terms of the catch up in wages that have been lagging behind prices and whether that can be happening without triggering subsequent increase in prices. It's not so much from the strength of the labor market, per se, and so therefore, there is a slightly different assessment of the risks going forward in both regions.

MR. DE HARO: Okay, before we come back to the room, I have another question from Webex. I think it's from Gigi Press.

QUESTIONER: Hi. Thank you very much, Jose. I have a question on Federal Reserve (inaudible). According to the projection, you know, begin cutting rate increase during the second half this year, what is your expectation for the further appreciation? And could it put, against substantial (inaudible), especially in lower income countries? Thank you very much.

MR. DE HARO: So, it's on the Fed. And as they will become, we will start cutting rates. What's going to happen with the U.S. dollar?

MR. GOURINCHAS: Okay, so here, this is actually another one of the potentially positive development that we might see in 2024 is, as the Federal Reserve might start easing its policy rate, might start cutting, and our expectation that this could start in the second half of the year. This could lower the attractiveness of U.S. investments, and therefore ease the pressure in terms of capital flows and currencies on other countries. And in particular, that could relax a little bit some of the appreciation of the dollar that we've seen in the past. And we know that as this happens, this might also be something that helps and support, in particular, emerging market economies. So that's something that would provide a little bit of a breathing room also to emerging market economies in the second half of the year and maybe even earlier, since it's likely to be anticipated by the markets already.

MR. DE HARO: Okay, we go to a room. Don't worry, Rachel, you will go next.

QUESTIONER: Thank you. My name is Simpata Goody (phonetic), I’m from Bloomberg News. My question is, have you factored in projections of the upcoming elections in South Africa? And do you see this as a factor leading to perhaps influencing the ratings? In other words, have you calculated the possibility of losing and then having a change in policy impacting the ratings downgrade post elections?

MR. DE HARO: And there's another question on South Africa. We can bundle those. It's from Business Report DSTAR (phonetic) and goes as follows. What sort of reforms have required to turn the tide around the logistical constraints in South Africa which have an impact on economic activity of the Sub-Saharan Africa Region?


MR. LEIGH: Thank you. So you asked about the elections, and in fact there is a bigger picture here of elections in 2024 in many countries. And there is a common aspect, which is that in that context we could see a slower than expected implementation of a variety of reforms, including on fiscal policy, tightening to rebuild space in the budget after Covid and all the other shocks. So there could be an easing up in many countries.

And that also applies here in South Africa, where there is a need to rebuild budgetary buffers. But, you know, there could be pressures, as in other countries too, pressures on the budget, not to tighten as much. There could be pressures on reform momentum and that could drive up debt financing costs. Observers could be concerned about that and increase the borrowing spreads.

So in terms of the kind of reforms that would really help to turn things around, our perspective is that resolving the energy and logistical crises is the top priority. Ensuring that the power plants can get back online, connect more renewable energy, and create this kind of conducive environment to attract more private investment. Opening up competition, and especially in these network industries, energy, ports, rail, telecoms.

So addressing the governance weaknesses, this is not only in the current context in South Africa, but across the region, Sub-Saharan Africa, there are a number of structural bottlenecks. And this is what could create the environment to attract that investment. This includes from richer, advanced countries where there is the capital, to bring it here to this potentially very dynamic region.

MR. DE HARO: Okay, before we go back to the floor, we're going to change regions here. We're going to the U.K. We have several questions from Sky News, ITN, among others, that asks, what's the Fund’s staff advice on whether tax cuts are appropriate in the U.K. at this juncture.

MR. GOURINCHAS: Right, so let me first start by giving our projections for the U.K. We're expecting growth of 0.6 percent this year, which is unchanged from our October projections, and is expected to come up in 2025 to about 1.6 percent, returning to some level of normalcy. Now, in this context, what we are saying also in the U.K. and in a number of other countries, is there is a need to put in place medium term fiscal plans that will accommodate very significant increase in spending pressures.

In the case of the U.K., you might think of spending on healthcare and modernizing the NHS, spending on social care, on education, you might think about critical public investment to address the climate transition, but also to boost growth. And so it's very important to have in place medium term fiscal plans that accommodate these pressures, at the same time ensuring that debt dynamics remain stable and contained. And so that requires a combination of tax and spending measures to make sure that you can allocate the resources when they need to be allocated, but at the same time preventing your debt levels from increasing. And in that context, we would advise against further discretionary tax cuts as envisioned or discussed now.

MR. DE HARO: Okay, questions on the floor? Rachel and then we will get to you.

QUESTIONER: Hi there. Firstly, a question on the global economy. Are there still any risks of a global recession or a recession, perhaps in developed economies, or have those risks passed as the risks that you spoke of became more balanced? On Sub-Saharan Africa, you projected GDP growth to increase this year, but is it sufficient to sort of deliver the job rich sort of sustainable growth, given the sort of booming youth population here? And finally on Zambia, is the sort of ongoing delays in the debt restructuring, how is that affecting Zambia's growth outlook? And can we expect a resolution to that anytime soon that would help Zambia's growth outlook at all?

MR. GOURINCHAS: Right. So, on global growth and the risks of a recession, I think the risks, when we're looking at growth rates that are 3.1 percent this year, 3.2 percent. We're very far from a global recession scenario and I think we haven't done a risk analysis around our baseline this time around because this is just an update. But when we do a full report, we often do a risk analysis around the baseline, but I'm fairly confident that the risk of a global recession would be fairly minimal at this point.

Now, it's true that there is a little bit less growth in advanced economies. We're projecting 1.5 percent growth in advanced economies going back to 1.8 percent next year. But here again, very far from recession scenarios. There is weaker growth in the Euro area, and the 2023 was actually a year in which global growth was, Euro area growth, was 0.5 percent. That's very, very low, but that was still positive and it's expected again to increase.

Now there are more, you know, f you put the risk distribution around the 0.9 percent, you're closer to an environment in which you could have adverse developments. But we are saying, along the baseline, we're saying growth resuming as monetary policy is expected to ease. We are expecting that the cost of credit is going to come down, that's going to support growth. We're saying this wage increase I was talking about, you can look at them and think that they are a risk for inflation, but they're also supporting spending and are supporting household income. So that's something that is also supporting growth. On South Africa and Zambia, maybe, Daniel, I turn it over to you?

MR. LEIGH: Thank you. You asked about kind of growth that we have in Sub-Saharan Africa in the forecast and is that enough? And what I'd say is that the growth forecast we have over the next few years, about 4.3 percent, that's well above the global average, which is around 3 percent. But then when you look at it in a per capita terms, because there's more rapid population growth, it's actually not -- the gap is much smaller. And if you take advanced economies, we see per capita growth there at about 1.5 percent in the medium term. Well, that's roughly the same as currently for Sub-Saharan Africa. So that's not going to make progress towards converging towards the higher income per capita. And that's where the policy reforms that we were discussing earlier could support.

Now, on Zambia specifically, we are seeing growth gradually rising from 3.6 percent last year. And what is helping that is a recovery in the non mining sector, as well as the copper sector. And the medium term growth would be underpinned by reforms in the authorities program. So that would promote investments in education and health, as well as the debt restructuring. These would push up the longer term growth.

MR. DE HARO: Before coming to the floor, we will get back to you, but we have two other reporters on Webex. Bucola (phonetic) and Numa (phonetic), please go ahead with your questions. Are you ready? If not, we can go back to the floor.

QUESTIONER: Yes, I am ready.

MR. DE HARO: Okay, go ahead, please. We cannot hear you.

QUESTIONER: Hello, can you hear me?

MR. DE HARO: Now we can hear you.

QUESTIONER: Okay, thank you very much. The IMF has, in the past, made recommendations that are in regards to foreign exchange (inaudible), and now we are seeing the currency on a free fall, triggering a spike in inflation, and we're looking at a rising cost of living. What can be done to reverse the situation to reduce the hardship and impending rising poverty level in the country?

MR. DE HARO: We're talking about Nigeria.

QUESTIONER: Okay, can I also chip in?

MR. DE HARO: Of course. We can hear you loud and clear.

QUESTIONER: Okay, thank you. Also, there was a slight downgrade compared to your last report. Can you speak on that? And again, I'm going to have to hamper on foreign exchange reforms we've had so far. Can you specifically address that because now the naira is constantly going down, it's somewhat going on a freefall. So please can you also speak on foreign exchange reforms? Thank you.

MR. DE HARO: Daniel?

MR. LEIGH: Thank you. So yes, there were reforms and the currency depreciated, and some of this weakness in the naira has contributed to the increase in inflation. Now there's also structural factors behind that high inflation, including, you know, on the fiscal side, financing of the deficit. But this is clearly creating hardship. The perspective that we have is bringing down inflation is top priority. And Central Bank has already, Central Bank of Nigeria, has already raised interest rates significantly over the past year to 18.8 percent. So that is the monetary tightening that is helping in our forecast to bring inflation down from 24.6 percent in 2023 percent, to 23 percent this year, and then closer to single digits into 2025 at 15.5 percent.

But on top of conquering inflation through the monetary tightening, there's also a need to provide the social support through the budget. And creating the space for that is the challenge. Our perspective is that more revenue mobilization, strengthening revenue administration, widening the tax base, this is what is going to bring in space for development spending while safeguarding fiscal sustainability. Thank you.

MR. DE HARO: Okay. We come back to the floor. You still have a question?

QUESTIONER: All right, good afternoon. My name is Innocent (sic) from Channels Television News. Still on Nigeria, could you kindly please talk to us about Nigeria's GDP growth projection? And also I would like to inquire about your assessment of the banking sector external debt. Any recommendation for sustainable economic development in Nigeria. But also, still in that region, speaking about ECOWAS, there are some countries that are threatening to leave. How much of a blow will that have on trade because there are some people who are using ECOWAS passports for trade and investment? Thank you.

MR. GOURINCHAS: So let me say a word and then, Daniel, maybe you can come in. So on Nigeria's growth rate, we have -- this has been pointed out, a slight downward revision for ’24 this year, 3 percent, it's a negative 0.1 percentage point. Next year is unchanged at 3.1 percent.

And on the impact of Mali, Niger, and Burkina Faso leaving ECOWAS, that was announced yesterday, this is something that of course we're monitoring. We're taking note it's a bit early to assess what the impact is going to be. But of course our assessment is that in general, having an integrated economic area is something that is going to be favorable, conducive to trade, and conducive to higher growth. And sort of moving away from this is going to have the opposite effects. Anything on the banking sector in Nigeria?

MR. LEIGH: No. What I would add is that the spreads for Nigeria is still high at about 570, but that they've come down from about 703 months ago. And so this is, for the country as a whole, going to ease some of the borrowing cost pressures, which then has knock on effects throughout the economy, including on banks. I'll leave it there.

MR. DE HARO: Okay. Now we're going to turn back to WebEx. I think that Liliana Franco has a question.

QUESTIONER: Hi, thank you for taking my question. I'm from Argentina. And in the way you project that the Argentina GDP will fall 2.8 percent, the same figure that it was projected in October, that it will grow Argentina. Can you explain a little more why is that? And the second question, which is the annual projection for this year, the inflation rate projection. Sorry. Thank you.

MR. DE HARO: And before we answer, there's another question on Argentina. This comes from AFP and basically says, as mentioned, inflation in the country is also so substantial that it's impacting the average inflation for all emerging and developing countries. Can you help us understand the main explanations for this revision, it is mostly technical?

MR. GOURINCHAS: So let me say a few things about Argentina. So, yes, we're seeing negative growth rate for Argentina in 2024, negative 2.8 percent. This is a very sizable downward adjustment of about 5.5 percentage point compared to our October projections. And we're expecting that growth will resume in 2025 at about 5 percent. So there could be a fairly strong rebound in growth, and that's conditional on the delivery of the fiscal consolidation that is actually beginning to take place in the country under the new administration.

Now on the inflation side, year-end-on-year-end inflation, in Argentina are expected to be in excess of 211 percent in 2023, And that's a very significant increase in the inflation rate in the region by almost 76 percentage point. And it's expected to come down. So, I mean, this 211 percent, this is about, at this point, this is about close to 25 percent month on month increase in prices and inflation. But this is expected to come back down to a much lower monthly inflation rates in the single digits by the middle of this year. And so that the year-end-on-year-end inflation would be around 150 percent by the end of 2024 and then would be expected to decrease even further.

So what we have here in Argentina in terms of what the process that's driving inflation is, of course, that we have very deteriorated initial conditions, if you want, where you had very rapid growth of the money supply, you had very important monetary financing of government spending, and that was fueling the inflation process. Now the current administration is trying to bring along a very sizable fiscal consolidation. They're trying to get to 2 percent of GDP primary surplus in this current year, in 2024, and that's about a five percentage point of GDP adjustment in the fiscal account. So it's a very sizable fiscal adjustment. And this is something that we consider is absolutely needed in the context of Argentina, because the root cause of the inflation process there is of course, that there's been quite a bit of monetary financing. So for that monetary financing of the government to stop, the government accounts have to be consolidated and stabilized. So that's very important.

At the same time, part of the current administration's efforts are to reduce a number of relative price distortions that were in place under the previous administration. And that has translated in a sharp depreciation of the currency. They devalued the peso, they've adjusted number of price, they've removed a number of subsidies, or in the process of removing a number of subsidies, that in the short term is fueling inflation. This is why inflation is so high, because the currency depreciating and removing and some of the subsidies increase the price that is being paid for them. But that's also why it's expected to be coming down from these very sharp levels. If that fiscal consolidation is put in place. Now, a major risk going forward is whether that fiscal consolidation can be implemented, and implemented durably, so that the situation stabilizes in Argentina from a very deteriorated set of initial conditions.

MR. DE HARO: Okay. We are running out of time. Is there any question in the room? Okay, last question is going to go then to WebEx. It comes from Egypt. So Doha, if you are online, please go ahead.

QUESTIONER: Good morning.

MR. DE HARO: We can hear you. Go ahead.

QUESTIONER: Thank you so much. Good morning, Erin, Daniel, and to all colleagues. I have two quick questions. To what extent the escalation in the Red Sea could disrupt the global trade flow, especially to the Middle east? The second question is on the key drivers. What are the key drivers behind the expectations, the way you introduces for developing countries, especially oil importers, especially for growth and inflation? Thank you so much.

MR. GOURINCHAS: Daniel. Do you want to give it a try?

MR. LEIGH: So about Egypt, despite strong tourism performance overall in 2023, there's been a slowdown since the start of the conflict in Gaza, in Israel, with hotel bookings clearly coming down. And now on top of that, there's the escalation and the Red Sea attacks, which may impact, and are impacting, foreign exchange inflows. That's about $700 million a month, very important source of foreign currency for Egypt.

So this is a challenge in terms of the heightened uncertainty. This is also impacting investment prospects. External financing conditions are challenging already and with the sovereign spread in distressed territory since March, what is really essential here is securing additional financing. This is going to make possible the reforms to bring inflation down and to restore growth.

Our forecast is that growth will recover next year from 3 percent this year to 4.7 percent next year, and this will be supported by IMF financing. In terms of the EFF program, what I can say is that the additional financing is critical on the IMF program. What I can say is that the IMF is in discussions with the authorities on a set of policies that could support the completion of the first and second reviews of the program.

MR. DE HARO: Okay. And I think that that's a very good way to end and also to remind everybody that tomorrow the Director of the Middle east and Central Asia Department is going to be giving a press conference at 07:30 a.m. So then if you have further questions on the region, on the conflict, on trade, you can follow up with that press conference.

But before that, I want to thank Pierre-Olivier and Daniel, and also all of you for coming and attending today. I want to remind you that the document will be available at and if you have further questions or comments, send them my way at Thank you very much.

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