Transcript

Speakers:

Pierre‑Olivier Gourinchas, Director, Research Department, IMF
Petya Koeva Brooks, Deputy Director, Research Department, IMF
Deniz Igan, Division Chief, Research Department, IMF

Moderator:

Jose Luis De Haro, Communications Officer, IMF

 

Mr. De Haro: Hello. Can you hear me? Yes.

Good morning and welcome. It is so good to see so many familiar faces here in the room, also some new faces. I want to give a warm welcome also to those people who are joining us online.

I am Jose Luis De Haro with the Communications Department. And we are gathered here today for the launch of the latest edition of the World Economic Outlook, which is titled “Global Economic Economy in Flux, Prospects Remain Dim.”

So, if you haven’t yet I would recommend you to go to imf.org. There, you are going to be able to download the latest World Economic Outlook; also, Pierre‑Olivier’s blog and many other assets that might be helpful for your reporting. But what’s best today, to unpack the latest details of this World Economic Outlook, where we are projecting a global growth of 3.2 percent for 2025, than to be joined here today by Pierre‑Olivier Gourinchas. He is the Economic Counsellor and the Director of the Research Department. Next to him are Petya Koeva Brooks. She is the Deputy Director of the Research Department. And last, but not least, we have Deniz Igan. She is a division chief also with the Research Department.

Before we fasten our seat belts for this trip around the world, Pierre‑Olivier is going to start with some opening remarks. So, I think we are ready for takeoff. Pierre‑Olivier, the floor is yours.

Mr. Gourinchas: Thank you, Jose. After a soft landing, a soft takeoff, I guess.

Global trade developments continue to shape the outlook, but other drivers are increasingly coming into the picture. In April, the U.S. shook global trade norms by announcing sweeping tariffs. Our April report offered a range of estimates for the resulting growth downgrade, from modest to significant.

Six months on, where are we? The good news is that the growth downgrade is at the modest end of the range, with growth projected at 3.2 percent this year and 3.1 percent next year, while inflation has increased modestly and is proving more persistent. Now what explains this modest impact? First, and foremost, the tariff shock itself is smaller than initially feared, with many trade deals and exemptions. Most countries also refrained from retaliation, keeping the trading system open. And the private sector proved agile, front‑loading imports and rerouting supply chains. Second, financial conditions remain loose, in part, because of a weaker dollar. In some countries, such as Germany and China, fiscal policy turned expansionary; and in the U.S., an AI‑ and tech‑driven investment is booming.

Yet despite all these offsets, the tariff shock is here, and it is further dimming already weak growth prospects. This is clear even in the U.S. Growth is revised down from last year. The labor market is weakening. And inflation has been revised up and is persistently above target, signs that the economy has been hit by a negative supply shock.

Where do we go from here? The outlook remains fragile and very sensitive to news on the trade front, as I am sure all of us have noted. Flaring up trade tensions, with a potential for supply chain disruptions, could quickly lower global output by as much as 0.3 percentage points, as we explore in our downside scenario.

Besides trade tensions, I want to quickly flag four other downside risks.

First, there are echoes in the current tech investment surge of the dot‑com boom of the late 1990s. It was the internet then. It is AI now. We are seeing surging valuations, booming investment, and strong consumption on the back of solid capital gains. The risk is that, with stronger investment and consumption, tighter monetary policy will be needed to contain price pressures. This is what happened in the late 1990s. There is also the flip side of the boom. Markets could reprice sharply. This would reduce wealth, consumption, and investment, lower activity, and could spill over to broader financial conditions.

Second, there are continued concerns about China’s growth model. The bubble in the property sector remains a source of weakness. Growth in recent years has come from exports, but it is increasingly hard to see how this could be sustained. And the economy remains uncomfortably close to a debt deflation trap. The pivot toward investment in strategic sectors, such as electric vehicles or solar panels, through the use of large‑scale subsidies has delivered significant gains in these sectors; but it may also have contributed to a broader misallocation of resources, as indicated by the lack of aggregate productivity gains. Our work highlights that industrial policy can, indeed, boost production in targeted sectors and sometimes productivity, but it brings significant fiscal and hidden costs and potential negative spillovers.

Third, in too many countries, insufficient progress has been made to rebuild fiscal space. The situation remains precarious, with lower growth, higher real interest rates, elevated debt levels, and new spending needs, such as defense, economic security, or climate adaptation. Low‑income countries are even more vulnerable, as they face the prospect of reduced aid flows from richer countries. The lack of growth prospects could morph into social unrest, particularly among unemployed youth.

Fourth, as fiscal constraints become more binding, we are seeing rising pressures on central banks. Calls to ease monetary policy, whether to support activity or reduce government debt service at the expense of price stability, always backfires. Trust in central banks helps anchor inflation expectations, and this credibility needs to be protected. As trust erodes, inflation and inflation expectations always rise, macroeconomic stability deteriorates, and everyone loses out. This is a lesson that countries — advanced and emerging alike — have learned the hard way. Let’s not forget it.

While these risks are serious, all is not gloomy. A few important developments could quickly brighten the outlook. First and foremost, resolving policy uncertainty with clearer bilateral and multilateral trade agreements and lower tariffs can help boost output in the near term. Second, AI has the potential to increase productivity. Many of us are already using it, and we can attest to its benefits. Improved domestic policies will also go a long way to help improve resilience, reduce macroeconomic risks, and help resolve global imbalances. Restoring fiscal space, where needed, improving the efficiency of public spending, ensuring independent, transparent, and tailored monetary policy, and above all, adopting government policies that invest in the future and empower private entrepreneurs to innovate and thrive. Thank you.

Mr. De Haro: Thank you, Pierre‑Olivier.

Before we open the floor to your questions, some in‑flight rules, so we avoid any turbulence.

First of all, if you want to ask a question, raise your hand. Wait until we call on you. If we do, identify yourself and the outlet that you represent. We are trying to cover every region. We are not going to be able to cover the 191 countries, but we will do our best.

Second, we are here to discuss the World Economic Outlook. So, questions regarding specific country programs or institutional issues are not for this forum. There are going to be plenty of opportunities later on this week, with the regional press briefings and also with the press briefing from the Managing Director.

And last, but not least, we are also going to be taking questions from WebEx and from our press center.

So, I think we have reached cruise altitude, so let’s see. I am going to go to the second row there, please.

QUESTIONER: Good morning. I was just wondering, in your report, you say protectionist measures have had only a limited effect so far, but you have also flagged sort of high levels of uncertainty around trade policy. I was just wondering, how much of an economic impact do you think there could be from the most recent tariff threats between the United States and China? Thank you.

Mr. Gourinchas: Well, of course, the recent announcements last week make us all realize that trade uncertainty is still with us. It is certainly something that could weigh on the outlook. Now, of course, the situation is very fluid. There are lots of discussions going on. And this is obviously not in our baseline projections — 3.2 percent this year, 3.1 percent next year. This is more of a downside risk, in a sense. We have to think about what could happen if negative trade measures were implemented, if some restrictions on exports of critical materials were implemented. This is something, of course, we are thinking about.

We have, in our report, a downside scenario. These are not the very specific details of what is being considered right now, but it illustrates the potential for the global economy to take a turn for the worse if trade tensions become more elevated. In the scenario that we explore — which, again, I want to emphasize is not necessarily targeted specifically to what we are seeing — there could easily be a decline in global output by about 0.3 percentage point.

Now what I would also want to say is that the uncertainty about trade policy in the future is something that is already reducing economic activity. The place where we see that is when we look at investment. I mentioned in my remarks that we have a boom in the tech sector. So, we are seeing investment overall doing quite well, especially in the U.S. But if you leave that aside and you look at investment outside of the tech sector, it is actually declining compared to last year. And that reflects, in part, the uncertainty that many businesses are facing when they are thinking about the future and scaling down their investment plans. So that uncertainty is already weighing on the outlook.

Mr. De Haro: OK. Here in the first row. Then we are going to go back. Then I am going to go left, then right.

QUESTIONER: I also have a question on trade.

I think the IMF has repeatedly warned about trade uncertainty and its impact on, like, the fragmentation of the global economy. I wonder whether you could share some thoughts on the fragmentation part in the longer term. Thank you.

Mr. Gourinchas: Well, there certainly has been concern about geoeconomic fragmentation for a long time. We are seeing elevated trade tensions. We are seeing a number of industrial policy measures that are designed to protect or promote certain industries in certain countries. And we are seeing a re‑orientation of trade flows already.

What we are seeing, when we look at the global picture, is not that trade has decreased. Trade to global activity, trade to GDP, that ratio has been more or less constant. In fact, in the early part of 2025, it even increased because there was a lot of front‑loading, where businesses were trying to get ahead of tariffs that would be implemented later on. And there was a surge in imports for many countries that boosted overall trade. But our picture, when we look three, four years out, we are seeing that that level of trade will actually moderate, and it will change in its composition. We are seeing a lot less trade, for instance, between the U.S. and China. But we are seeing a lot more trade between either the U.S. and China and other parts of the world. Exports from China to other Asian economies or to Europe have increased significantly. Imports from the U.S. side from Europe or from other Asian economies have also increased. So, the trade matrix is changing. It is adapting to these tensions. And so far, it is not really declining, but it has become more complicated, so very much, a much more complex picture.

Mr. De Haro: OK. I am going to go to the corner there, the woman with the glasses. Yes.

QUESTIONER: Hello.

I have one question. When will the IMF have its fifth and sixth reviews for the Egyptian economic reform program? And also, how does the IMF view the ongoing government’s efforts to empower the private sector and implement the divestment [program]? Thank you.

Mr. De Haro: And before we answer, there is another question on Egypt on WebEx. So please, Doaa

QUESTIONER: Hello, everyone. Good morning. Thank you for taking my questions.

I have a couple of questions. My first is on Egypt. What are the key drivers behind upgrading the growth for — the real GDP growth for the country and for inflation?

And my second question is with a global angle. What are the expectations for the [fuel] prices and trade flows, especially under the latest updates on the geopolitical front globally and regionally? Thank you so much.

Mr. De Haro: Thank you very much.

Mr. Gourinchas: Let me turn to Petya for Egypt.

Ms. Koeva Brooks: Thank you.

On Egypt, we have, indeed, upgraded our forecasts for both this year and next, to 4.3 in 2025 and 4.5 in 2026. And what’s behind these upgrades is the notable improvements that we have seen in the non‑oil manufacturing sector, the tourism sector, as well as the telecommunications sector. And again, the buoyancy in those sectors has very much offset the declines that we have seen in the Suez Canal activity, as well as in the mining and extraction activities. So, again, going forward into 2026, we expect some stabilization in the Suez Canal and mining activities, together with continued strong growth in the sectors that I mentioned earlier.

Now, when it comes to inflation, we are expecting it to decline further over the forecast period. And one favorable development has been the fact that in August, inflation hit a 40‑month low. And that was very much due to the restrictive — to the tight monetary and fiscal policies, as well as the easing of FX shortages, in addition to the waning effects of depreciation. Let me stop here.

Mr. De Haro: OK. And I just want to remind everybody that there are going to be regional press briefings later this week, so you can tackle a little bit more Egypt in more detail when those regional press briefings happen.

I am going to move to this side of the room. So, I am going to go with the gentleman — the one with the light jacket.

QUESTIONER: Thank you. Good morning.

You have not spoken about the dollar issue. If you could tell me something about this. You mentioned central bank‑related issues. But dollar weakening, what will be the impact on interest rates, monetary policy, and maybe cheaper capital — cheaper fundraising in emerging markets and Latin America, please.

Mr. Gourinchas: Yes. So, on the dollar, what we have seen this year is a weakening of the dollar in the first part of the year — in April, May, starting in January. But in January until May, the dollar weakened significantly, about 10, 12 percent or so against other currencies, most other currencies, with maybe the exception of the Chinese renminbi. And that easing of the — weakening of the dollar is something that helps financial conditions in many emerging market economies. Especially countries that have dollar‑denominated debt, whenever the dollar becomes weaker, the debt burden is slightly alleviated. So that has contributed to improving financial conditions in those countries.

The depreciation of the dollar also helps a number of these countries on the inflation front because a lot of goods are invoiced in US dollars. And so, when the price in dollars remains constant but the dollar itself is weaker, that means that import prices are not rising as much in some of these countries. So, this has contributed to some of the resilience we have seen in emerging market economies.

So now going forward, what we are seeing in many countries now is, many countries are facing different conditions in terms of monetary environment. Some countries still have some inflation pressure, are not fully back at inflation targets. Other regions are back at inflation targets. So, we see a lot of differentiation in terms of the monetary policy stance that is very appropriate and the reliance on letting the exchange rate adjust for this difference in monetary stance. So that is another lesson that we see when we look at the data, a lot of emerging market economies, in particular — including in Latin America but elsewhere as well — have become more comfortable letting currencies adjust, when it is needed, so that they can set their monetary dials for their domestic inflation circumstances.

Mr. De Haro: OK. The woman in the first row.

QUESTIONER: Thank you very much. You projected Nigeria’s growth to grow to 3.4 percent in 2025, a few months ago. I want to know if there has been any change to that forecast, and what are the drivers of that forecast. Thank you.

Mr. Gourinchas: Well, indeed, the growth rate in Nigeria has been increased to I believe 3.9 percent, but let me turn it over to Deniz to provide some more texture.

Ms. Igan: Sure. Thank you.

As Pierre‑Olivier said, for 2025, we revised upward the growth rate for Nigeria to 3.9, so this is 0.5 percentage points higher than what we had before. We have also upgraded the 2026 growth projection by 0.9 percent, to 4.2.

Actually, going back, the 2024 number itself has also been revised upwards and is now 4.1. This is 0.7 percentage points higher. The reason for the 2024 GDP growth number being higher is because of the authorities’ GDP revision and rephasing, which provides broader coverage of activity in the economy, including some informal activities are now covered there.

And for 2025 and 2026, the upward revisions basically reflect some reduced uncertainty and the limited impact of U.S. tariffs on Nigeria, given its limited exposure.

Since July, we also had the exchange rate appreciating; financial conditions strengthening, with the increase in investor confidence. And on top of that, we also have the fiscal stance remaining supportive. And hydrocarbon growth was also revised up, with higher oil production under improved security. All those factors ultimately culminated in the upward revisions.

Mr. De Haro: I am going to go to the gentleman with the white shirt and the jacket there.

QUESTIONER: Hi Pierre‑Olivier. Are you saying that this tech bubble is about to burst? Is that what you are saying?

And just quickly, on the U.K., how do you assess the resilience of the U.K. economy? I mean, you have slightly upgraded the U.K. this year, but inflation seems pretty high on your forecast.

Mr. De Haro: OK. Before we answer if the bubble is bursting or not, are there any other questions on the U.K. in the room?

QUESTIONER:

You talk in the report about the link between fiscal vulnerabilities and financial market fragilities and the prospects of investors losing faith in countries with high debt. Is the U.K. in that camp?

QUESTIONER:

You are forecasting that this year and next, Britain will have the highest inflation in the G‑7. Do you think that Britain has some kind of — sort of an inflation problem? And how confident are you that these are all definitely temporary factors pushing up U.K. inflation?

Mr. De Haro: OK. I think we are ready to answer.

Mr. Gourinchas: I will start with the easy question, the bubble.

So obviously, no one can know for sure. What we are seeing is very robust investment in that sector, both from the companies that are directly developing models of artificial intelligence, the hyper‑scalers, but also a lot of investment from companies that are adopting. A lot of software investment, this is being adopted very broadly. And that certainly is contributing to the growth performance in the U.S. right now. It is sustaining activity.

The valuations that you see in the stock market reflect the projections about profits in the future, of course, and they are fairly elevated. So, we see valuations are quite stretched. They might turn out to be right. Who knows. But they are quite elevated. And they are feeding into strong consumption, as people see their portfolio doing pretty well. So, all of that is adding to demand pressures, if you want.

Now, whether this will be followed by a market correction, I don’t think anyone can tell for sure; but we have to be — and part of our job is to be looking out for potential risk. And it is certainly one of the risks.

Now, on the U.K. So, the U.K. is both maybe the highest inflation in the G‑7, but it also has above average growth in the G‑7. So, it is actually doing something right in terms of growth at least. So, we have U.K. growth at 1.3 percent this year and next. It is slightly revised up this year. It is slightly revised down next year. And inflation has, indeed, been revised up, as well. We have 3.4 percent inflation in the U.K. for this year, expected to decrease to 2.5 percent.

So let me start with the inflation and then maybe end on the debt.

On inflation, our analysis is that a lot of the drivers of the inflation numbers — which have been pushing up. I mean, inflation was 2.5 in 2024 and is now 3.4. So, it looks like it is moving in the wrong direction. But a number of the factors behind this are what we see as temporary factors, being an increase in what we call regulated prices, the price of transportation, the price of water. And some earlier declines in some components of the basket, like energy prices, are sort of moving out of the window of which we calculate the inflation rate. So, you see some normalization coming from that. So, we expect that this will moderate going forward, but there are risks. And we see some upside risk. Where are the risks coming from? Well, there is some increase in labor costs. And also — and perhaps this is the thing that I would pay more attention to — is, we see some increase in inflation expectations. Inflation expectations have been slightly nudging up, not just at one year but also at three-year, five year. And that is a sign that somehow households and firms in the U.K. are becoming maybe a little bit less certain that inflation will be coming down quickly. And so, the path forward for the Bank of England should be to be very cautious in its easing trajectory and make sure that inflation is on the right track.

Now, finally, on U.K. debt. I mean, the rates have been increasing. The 10‑year yield on the gilts have been increasing. But one is to keep in mind that they have been increasing, and the term premia have been increasing in many places around the world. There is a global factor at play here, which is that we are in an environment in which bond investors, in general, are becoming a little bit more prudent about their investment in sovereign debt. Our assessment of the U.K. debt market is that it is still a solid economy. The trajectory — the fiscal trajectory is expected to stabilize, the debt‑to‑GDP. So, we are not seeing major risks there at all.

Mr. De Haro: OK. Before I move to this side of the room, we are going to take a question on WebEx. Please, go ahead. Can you hear us?

QUESTIONER: Good day. So far, you have mentioned the economic risks for the global economy — tariffs and the potential bubble of the AI market we just discussed. But how do you evaluate — on top of these things, how do you evaluate risks of geopolitical tensions that might impact global markets, particularly, again, in the Middle East and Russia’s protracted war against Ukraine that might also affect Europe.

Mr. Gourinchas: So, we do pay attention to these risks. And in fact, in our risk analysis, when we evaluate different scenarios for the global economy, we are also considering what might happen if you have a disruption — I am looking at the scenarios here and the details. We are looking also at disruptions in commodity prices and changes in financial conditions. So obviously, you have to think carefully about, what are the channels of transmission here, when you are thinking about geopolitical risk.

We have geopolitical risk already with us. And the question is, where might they manifest themselves? So, if they manifest themselves in a way that leads to a disruption in energy markets, in particular, then that could lead to an adverse effect on the global economy. If you imagine that you have disruptions in oil markets, for instance — which we have seen in the past — or if you think about energy markets more broadly.

If you have other types of tensions, I think then the issues might be a little bit more complex to analyze. You might have to think about: What is the impact on growth rates? What is the impact — you have to think about the spillovers. You know, for instance, if I were to think about the spillovers from what is happening in Ukraine specifically, you would want to think not just about the impact on the uncertainty it creates in other countries. There are impacts in terms of labor migration. So, you want to factor all of these different layers to come up with an assessment.

So, I think there isn’t a generic answer. My answer is that there is not a single answer, and one has to look at the specific details. But one of the things we have looked at in the past in some of our risk scenarios is precisely to think about an escalation of geopolitical tensions that would affect energy markets and energy prices.

Mr. De Haro: As promised, I am going to this side of the room. I am going to take the lady here.

QUESTIONER:

So, the WEO has, over the past two years, highlighted geopolitical tensions, particularly the Russia‑Ukrainian war, which our colleague just referred to, and the war in Gaza as the main risk factors and concern for growth globally and regionally in the MENA region.

Now that the peace deal has been signed yesterday in Sharm el‑Sheikh, in Egypt, will this prompt the IMF to revisit the outlook for the region? I know Petya just highlighted the outlook for Egypt and how this has been raised. But I mean, would this prompt the IMF to revisit those numbers now that a peace deal has been signed, especially that we are looking forward for huge reconstruction plans for what lies ahead of that war. And that might change probably the plans for all the exposed economies — Egypt, Jordan, the West Bank.

And I know this is about the outlook, not about programs. But will the IMF consider any special treatment or program for Gaza, even if Palestine is not one of the countries or the member countries in the IMF, given that it has undergone a two‑year really bad war? Thank you.

Mr. De Haro: OK. On that last part of the question, that is for the regional press briefing. The first part of the question.

Mr. Gourinchas: Well, I would just say first, we welcome, of course, the developments over the last few weeks and the announcement of the first stage of a peace plan that would bring some economic and political stability to this region. It would be a major achievement.

In terms of the economic implications for the regions, they are also things that will be covered in` more detail in the regional briefing that my colleague Jihad Azour will give.

But maybe I will turn to Petya, if there is anything else to add at this point.

Ms. Koeva Brooks: There’s not much to add. Of course, this presents an opportunity to build the foundations for a lasting recovery in the region, and we stand ready to cooperate with the international community on this.

Just to say that for the region itself, beyond Egypt, we are already — we have actually upgraded the forecasts. And that is the case both for the oil exporters, as a group, mainly due to the unwinding of the voluntary cuts in Saudi Arabia, but also for the oil importers. There, we see the positive impact of relatively lower commodity prices, as well as the robust remittances and relative strength in the tourism sector, all of which have contributed again to the upward revision of the forecast for those countries.

Mr. De Haro: I am going to go to the gentleman with the tie, red and blue.

QUESTIONER: Thank you for taking my question.

I was going to ask you, is President Trump bad or good for the global economy? And he is, I would say, crazy about the tariffs, on everything, and the deportations of hundreds of thousands of people. Are those things having a negative impact to the global economy? Or is he helping even the U.S. economy? Thank you.

Mr. Gourinchas: Well, let me take the question from the angle of the labor market here because I think this is one of the important developments that we have seen in the last year.

We have seen a sharp decrease in payroll growth in the U.S., from upwards of 100,000 a month to less than 50,000 a month. And of course, a situation like that in the past would have been associated with a very marked deterioration of the labor market. We haven’t seen that this time around. The unemployment rate has increased very modestly. And of course, what has been happening is on the other side of the labor markets, on the labor supply. So, we have seen a very sharp reduction in the share of foreign‑born workers in the labor force in the U.S. that have, you know, removed themselves from the labor market. And that, of course, is something that is weighing down. You can think of this as another negative supply shock on top of the tariff shock. What the reduction in the labor supply does is, it is creating tightness in the labor market. It is adding pressures in the labor market. It is potentially adding cost. It is reducing output. So, it is potentially both reducing output and increasing inflation. So that reduction in the foreign‑born share of the workers in the labor supply is something that goes in the same direction as the tariff shock and is certainly weighing on economic activity in the U.S.

Now, there are other forces pushing in the other direction. We mentioned the AI investment surge. There is fiscal policy that is becoming quite stimulative. Consumption has been fairly robust. So overall, growth in the U.S. has remained fairly, fairly good. It has slowed down from 2024, but it is still about 2 percent in our estimate for 2025. But the place where you can see that reduction in the labor supply is if you look forward and you think about, what is the potential growth for the U.S. And that estimate, of course, is very imprecise; but our estimate of potential growth in the U.S. has been revised down, as well. And that is reflecting that lower contribution from a foreign labor force that was quite significant in previous years, and we are not foreseeing that it will continue to contribute.

Now, the other side of this is, what does it do to the rest of the world? Well, obviously, if you have slow growth in the U.S., per se, it is not a good thing for the rest of the world. There are spillovers that come from when an economy like the U.S. growing strongly, then it generates demand for other parts of the world, as well. So, something that is contributing to a slowdown in U.S. growth is, in general, not something that is going to be good for the rest of us.

Mr. De Haro: OK. I am going to go to the gentleman with the glasses here in the middle. Yeah.

QUESTIONER: Your MD Kristalina clearly told the world leaders and the Governors “buckle up.” Can we understand three things that the IMF would want to tell the Governors as well as the Ministers across the world, how do they buckle up?

Mr. Gourinchas: Well, I think what our Managing Director is referring to is the fact that we are in an environment — wee have been living, for the last five, seven years, in an environment in which we are hit, the global economy is hit by fairly sizable shocks. They can be very concentrated. We can think, of course, of COVID that was a one‑in‑maybe‑100‑years‑type of shock. But even after that, with the cost‑of‑living crisis, we had the impact of a military conflict on European soil. You had the trade tensions. All of these things are disruptive to the global economy.

Now, for many countries in the world, these things are outside their control. These are not something that you directly have an input and can do something about.

So, the first part of buckling up is to make sure your economy is as resilient as it can be. And how do you make your economy resilient? Well, No. 1, you make sure that you have the fiscal buffers that you need because you are going to need to use them when you are hit by one of these shocks. And if you don’t have them, then the impact is going to be much larger. So, making sure you protect the fiscal buffers.

Second, making sure that you have the right institutional environment so that you have institutions that are trusted, that can do their job, that have frameworks that are strong. That is also going to be helpful in maintaining expectations and maintaining some sense of stability in the economy.

And third, you are going to have to rely on trading partners. No country is an island that can do things on their own. And so, making sure that the global economy — that countries remain part of the global economy, that they are integrated, that they find ways to deepen trade ties with partners, where it is possible, is an important part also of building that resilience.

And fourth, at the end of the day, growth comes from the private sector. It comes from the adoption of technologies that have been developed elsewhere. Most countries are not at the frontier of innovation. Most countries are inside that frontier and catching up with it. Or developing that frontier, making sure that the right efforts are made in terms of skilling the labor force in terms of adoption of technology, in terms of infrastructure investment so that countries can grow rapidly and unleash the private sector innovation and entrepreneurship.

Mr. De Haro: OK. We literally have 5 minutes and 25 seconds. So, I am going to take the lady with the white shirt. Then I will come back here.

QUESTIONER:

You reserved a lot of quite harsh words for China’s trade imbalances in this WEO. Probably for the first time in a very long time, we have heard the IMF talking about the nature of the Chinese trade surplus. I mean, is that at the behest of the U.S. administration, which is very preoccupied by this? This morning, Scott Bessent, the U.S. Treasury Secretary, said that China is trying to export its way out of its domestic problems, and it is hurting the world economy. Do you share that assessment?

And going back to the MD’s Curtain Raiser last week, she put up a very striking chart of the state of the renminbi, which would suggest that China is engaging in some degree of currency manipulation to boost their export performance. Would you be urging Beijing’s authorities to be taking a harder look at the state of its currency, as well?

Mr. Gourinchas: So, on China’s external balances, I would refer you first to the External Sector Report that we produce every year. That is the other flagship that comes out of the Research Department. The latest iteration was published in July. That report tries to assess when countries have excessive surpluses or deficits. That report highlighted that there has been an increase in global imbalances. There has been an increase in excessive deficits and excessive surpluses among different countries of the world. And it flagged three of them as having excessive either surpluses or deficits. Excessive surpluses were found in China, as you point out, also in the euro area. And excessive deficits in the U.S. So, I think we had a report that was very evenhanded.

Now, in terms of the economic issue on China’s growth model. I think what I highlighted in my opening remarks — and I think that is certainly the view that we have here at the Fund when we do our analysis of the Chinese economy — is that you have an economy where domestic demand has been very weak for some time now. It has been very weak, on the back of a property sector boom/bust that has not been fully resolved. We are four‑years‑plus in, and that property sector is not fully resolved. The real estate sector has still not recovered. And there are still a lot of potentially non‑performing loans, and the valuation effects are not realized in that sector. And that is weighing on confidence. Chinese households and businesses are reducing, scaling down their consumption or their investment because of that.

So, the growth in the Chinese economy in the last few years had been coming, in significant part, from the external sector. But what we are seeing there is something interesting, which is we see an increase in the volumes that are being produced. But we see increasingly a decline in the prices at which they need to be sold on markets. And that suggests that somehow, the market has a limited capacity to absorb all that is being produced coming out of China. And that suggests that that growth engine, that second growth engine itself, is starting to face difficulties.

So, our advice to the Chinese authorities has been, for some time now — you know, it has been for many years, if you look back at our Article IV — there is a need to rebalance the growth model toward a sustainable domestic demand. And there are a number of steps that can be implemented to do that, and some of them I am sure will be covered in the regional briefing. But that would pivot the economy away from being too heavily reliant on an export sector that is becoming more fragile in the environment we are in and a more resilient domestic growth engine.

Mr. De Haro: OK. I am going to try to squeeze one last question. We only have 1 minute and 27 seconds. I am going to go to the lady with the glasses. And this is the last question. Don’t get frustrated. There are going to be many opportunities to ask questions.

QUESTIONER: Magazine.

Could you provide updates on Africa? And I know a lot of the news this morning has been sort of gloomy. Could you give us any highlights, spots on the continent that are doing great? Thank you.

Mr. Gourinchas: Let me turn to this Deniz.

Ms. Igan: OK. I will give you an answer in a few seconds; but as Jose said, I am sure our African Department colleagues will be happy to elaborate further on that.

For sub‑Saharan Africa, we had growth upgraded, actually. The growth projections for 2025 are up by 0.2 percentage points, and the same goes for growth in 2026. So, we have 4.1 projected this year and 4.4 next year. And this resilience of the region has been supported by macroeconomic stabilization, as well as reform efforts that have been going on, including in key economies, such as Ethiopia and Nigeria. That doesn’t mean that there are no longer vulnerabilities and there are no challenges. Especially the resource‑intensive and conflict‑affected countries are facing significant headwinds; and based on our medium‑term outlook, also, we do see certainly challenges coming. And we do believe that the low‑income economies, including in sub‑Saharan Africa, are facing challenges in terms of the per capita income gap with their advanced economy pears widening, as we go.

And the thing to do in such an environment is going to be turning a little bit inside, as Pierre‑Olivier was saying; strengthening institutions further; doubling down on the reform efforts, including revenue mobilization through tax reforms; and strengthened debt management, including debt transparency and governance; and doing other structural reforms that could unlock the potential of the region. Let me stop there.

Mr. De Haro: OK. I think that we did achieve a soft landing.

So, as I said, there will be a lot of opportunities to keep asking questions during the week. And on behalf of Pierre‑Olivier, Petya, Deniz, the Research Department and the Communications Department, we thank you all for attending this press briefing.

A couple of reminders. The next press briefing is going to happen in this exact same room for the Global Financial Stability Report. Tomorrow, we have the Fiscal Monitor. And later in the week, we have the press briefing from the Managing Director and all those regional press briefings we have been mentioning during this press conference. So, thank you.

Any comments, feedback: media@IMF.org. Thank you very much.