IMF Managing Director Press Conference
IMF News, October 6, 2016
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- Published: October 6, 2016
Opening and immediate concerns
- Expressed deep concern for countries affected by Hurricane Matthew, with specific reference to Haiti and readiness to deploy rapid facility lines promptly.
- Speakers: Managing Director, IMF; First Deputy Managing Director, IMF; Director, Communications Department, IMF.
Global growth outlook and risks
- Forecasts:
- 2016 growth: 3.1 percent
- 2017 growth: 3.4 percent
- Characterization:
- Advanced economies: outlook remains subdued.
- Emerging and developing economies: guarded optimism with great diversity.
- Prospects for low‑income countries: becoming more challenging, particularly sub‑Saharan Africa.
- Key assessment: "Growth is too low for too long and benefiting too few," creating fertile ground for political dynamics that can further depress global growth.
- Brexit scenario planning: IMF prepared baseline, mild, and very adverse scenarios; current developments viewed as aligning with the mild scenario rather than the adverse scenario.
Major policy prescriptions (three‑pronged approach)
- Core prescription: urgent action to implement a mix of monetary policy, fiscal policy, and structural reforms simultaneously.
- Specific recommendations:
- Use fiscal policy where demand is lacking and monetary policy is overstretched.
- Reallocate spending within existing budgets toward productivity‑enhancing areas (e.g., research and development, infrastructure) when fiscal space is limited.
- Anchor policies in credible, medium‑term frameworks to support short‑term growth while keeping inflation expectations anchored and debt sustainable.
- Strengthen international cooperation to realize positive spillovers and raise growth; references to the Brisbane, Antalya, and Hengzhou G20 agendas.
- Pursue "inclusive globalization" to ensure trade and technological change benefit broad segments of societies and address those at risk of being left out by automation, digital economy, or supply‑chain shifts.
- Invest in education and infrastructure (including "soft infrastructure") to equip young workforces and facilitate transitions from agriculture to industry and services.
IMF institutional actions and financing capacity
- Concessional facilities:
- Board approved extension of zero interest rates on all Fund concessional facilities until 2018, and thereafter if interest rates remain low around the world.
- Overall lending capacity:
- Aim to maintain overall lending capacity of close to a trillion dollars by extending access to bilateral borrowing agreements.
- New bilateral agreements being signed will run at least through the end of 2019 and serve as a third line of defense.
- Reported pledges: US$ 344 billion from 26 members to date.
- Lines of defense (as stated):
- First line: quota
- Second line: New Arrangements to Borrow
- Third line: bilateral loans
Regional and country issues
- China:
- Celebrated inclusion of the renminbi in the SDR basket among five currencies; seen as anchoring China among large, international, open economies.
- IMF involvement: ongoing cooperation to reform financial markets and improve supervision; further reforms expected.
- Greece:
- IMF completed an Article IV; more work needed and a team will be sent to assess commitments under the ESM program.
- IMF is not participating in any Greek program at this point.
- IMF position: structural reforms must be delivered and debt must be sustainable; current debt assessed as not sustainable.
- Sub‑Saharan Africa:
- Overall growth for sub‑Saharan Africa cited as 1.4 percent.
- Concerns about large youth cohorts (close to 200 million Africans below 30 by 2020 referenced in questions) and the need for infrastructure and education to absorb them into productive employment.
- Spillovers from China are recognized; IMF advocates diversification away from natural‑resource dependence.
- Latin America and Brazil:
- IMF regional growth: Latin America at minus 0.6 percent (attributed largely to Brazil and Venezuela).
- Brazil forecasts: IMF WEO projects Brazil 2017 growth at 0.5 percent; World Bank report cited 1.1 percent for the same year (differences due to methodologies and references).
- United Kingdom:
- IMF had warned of consequences ranging from "pretty bad to very, very bad" in the event of a Brexit; current assessment views developments as closer to the mild scenario thanks to policy responses and international cooperation.
Financial sector and monetary policy observations
- Financial stability:
- Interconnection highlighted across financial, trade, growth, and debt directions.
- Banks, insurers, and pension funds faced with challenges due to prolonged low or occasionally negative interest rates; business models may need re‑architecture.
- Deutsche Bank referenced in questions; IMF notes GFSR does not single out Deutsche Bank but calls for banks globally to reassess business models.
- Monetary policy:
- Monetary policy has been heavily relied upon and has deployed unconventional tools; effectiveness is limited when used in isolation.
- Emphasis on combining monetary policy with fiscal and structural measures.
Political economy and legitimacy concerns
- Acknowledged public perceptions that the system may be "rigged" and the importance of a level playing field.
- IMF stance:
- Rules‑based, quota‑based institution aiming to improve participation, representation, and voice to better reflect the global economy.
- Rules may change through discussion, dialogue, consultations, and consensus or majority decision processes.
Closing priorities and expectations
- Call to action for Finance Ministers and Central Bank Governors: return home ready to implement policies that will propel inclusive growth.
- Upcoming events and cooperation:
- New bilateral borrowing agreements signing sessions planned during the next two days.
- 2018 Annual Meetings to be hosted by Indonesia, with regional cooperation (ASEAN, ASEAN+3, Chiang Mai initiative) highlighted as positive for growth.
IMF Managing Director Press Conference, October 6, 2016 — IMF Communications Department