Transcript of the International Monetary and Financial Committee (IMFC) Press Briefing

IMF News, April 12, 2014

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Need for a new balance in policies that meets the needs of the new phase in the economic recovery globally:
- Greater focus on the medium term more than the short term.
- Much greater focus on structural reforms, including:
- Balance sheet repair in banking systems, including in Europe.
- Improving labor market functioning to reduce extraordinarily high levels of youth unemployment.
- Building up and strengthening institutions in emerging, developing, and advanced economies.
Structural reforms should complement, not abruptly replace, macroeconomic support—especially monetary policy—while preparing economies for sustained growth.

Concerns highlighted:
- Legacy risks from the last crisis and new financial risks, notably increased corporate leverage in some parts of the world not matched by improvements in investment.
- Continued risk of volatility in capital flows to emerging market economies; this is expected to be a continuing challenge.
Observations on global finance structure:
- Larger capital flows with changed composition toward bond markets, mutual funds, and ETFs.
- Increased retail investor participation leading to more herd-like behavior and accentuated "risk on/risk off" dynamics.
Policy implication:
- Emphasis on work from the Global Financial Stability Report and continued monitoring of changing capital-flow composition and volatility.

Geopolitical tensions (explicit reference to Ukraine among other risks) were a distinct area of concern.
IMF role:
- Rapid engagement and stabilization where possible.
- For Ukraine: staff agreement on necessary measures and financing needs; Ukraine is "gradually, I understand fast, taking the measures" required for prior actions; expectation that program could be concluded "at the end of April."

Strong emphasis on completing the 2010 Reforms of the Fund:
- Seen as critical for a safer, better world and for the Fund to provide critical public goods.
- Calls for the United States to play its responsible role; confidence expressed that it will.
If 2010 reforms are not completed:
- Risk of disruptive change, weakening of multilateralism, and rise of regionalism and bilateralism.
- Statement that it is "entirely possible that the United States is going to ratify the 2010 reforms in the course of the year."

Strong endorsement of the Global Policy Agenda and focus on:
- "Pursuit of growth" that is better and more inclusive.
- Work on inequality from a fiscal point of view.
- Rebalancing: examples given include rebalancing in the United States and China; remaining rebalancing needed in some emerging market economies (deficits) and Northern Europe (surpluses).
- Climate change and environmental degradation recognized as macroeconomically important.
Structural reforms, investment, and infrastructure:
- Investment remains weak relative to where it should be across advanced and emerging economies.
- Infrastructure investment has "huge potential" for sustainable growth but requires transparent, predictable regulation and a framework that gives confidence to private investors.

Low inflation is an issue across many advanced economies, not just the euro area.
ECB context:
- Reference to "12 percent unemployment rate in the euro area."
- Encouragement that the ECB "has available, and will use in due course and if necessary, the appropriate tools to deal with it."
Policy stances noted:
- "Tapering" in the United States; continued accommodative policy in Europe and Japan; structural reforms broadly emphasized.

Emphasis on strengthening domestic resilience:
- Stable inflation, medium-term fiscal balance, and investment-friendly frameworks.
Discussion of gaps in the international safety net:
- Need for instruments providing quick liquidity to well-managed countries without conditionality to reduce ex ante reserve accumulation by developing countries.
- Careful study required to avoid moral hazard.

Greece:
- Acknowledgement of severe hardships, especially youth unemployment; cited figure "60 percent of the young people are unemployed."
- Signs of improvement: "for the first time seeing positive growth," exports improving, ability to borrow from markets "at not extraordinary but very decent rates and oversubscribed."
- Hope that returning confidence and structural reforms will lead to investment and job creation.
MENA region:
- IMF programs underway with Morocco, Tunisia, Jordan; negotiations with Yemen.
- Technical assistance provided to countries including Egypt.
Ghana and broader outreach:
- Emphasis on partnership approach, technical assistance, changed approach from past "structural adjustment" models.

On the G20 target to raise growth by 2 percent in five years (characterized in discussion as implying 0.4 percent per year in a question):
- IMF approach: scoring and assessment of contributions from G20 country plans before accounting for aggregate effects; currently in the "scoring phase."
- No automatic mechanical incorporation of "0.4 percent per year" into WEO forecasts without delivery and renewed commitments.

Recognition that past multilateral growth initiatives have often fizzled; participants noted differences this time:
- Greater detail around the kind of growth sought (inclusive, sustainable, mindful of externalities).
- Stronger engagement and willingness to be accountable.
Emphasis on avoiding policy slippage in good times by strengthening medium-term fiscal planning and institutions to reduce likelihood and severity of future crises.

Transcript of the International Monetary and Financial Committee (IMFC) Press Briefing (April 12, 2014) — International Monetary Fund