Transcript of International Monetary Fund Managing Director Kristalina Georgieva Media Roundtable
IMF News, January 12, 2023
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- Published: January 12, 2023
Global outlook and growth projections
- Growth continues to slow in 2023; IMF projected in October to go down to 2.7%.
- Expectation of "yet another half a percentage point in slowdown in global growth."
- Headline: growth in 2023 expected to be lower than in 2022; view that global growth may have bottomed out toward the end of 2023 with a hoped-for reversal to higher growth in 2024.
- On previous annual comparisons: "We saw from 6.1% growth in 2022 dropped to 3.2% in 2022." (text preserved as in source)
- China projected at "4.4% for 2023" in current early assessment (subject to final WEO update at month-end).
- China historically delivered "35, 40% of total global growth"; its performance is a central determinant of global growth in 2023.
Inflation, monetary policy, and central banks
- Inflation "remains stubborn"; central banks' job "is not yet done."
- Central banks in 2023 face a tougher task than in 2022: "stay the course" on price stability while "do it carefully" monitoring growth and employment impacts.
- Risk that renewed risk appetite could raise expectations that inflation will trend down, possibly forcing central banks "to do even more to counter inflation."
Labor markets, social cohesion, and downside risks
- Labor markets show resilience; as long as people are employed, consumers spend, supporting activity in Q3 in the US and the Eurozone.
- Tighter financial conditions' impact on unemployment may be delayed; potential later-year deterioration in employment could increase social tensions.
- Observed early-2023 social unrest in multiple countries (Brazil, Peru, Bolivia, Colombia, UK) highlights fragility of social cohesion.
- Main downside risks highlighted: escalation of the war in Ukraine, spillovers from social unrest, climate events, and cyberattacks — all characterized as low-probability but high-impact.
- Assesssment: IMF expects to "avoid a global recession" provided no new negative drivers; localized recessions remain possible.
China reopening and global spillovers
- Transition from ZERO-COVID to widespread COVID transmission presents a difficult adjustment: concerns about vaccination coverage (especially elderly), health system orientation, vaccine types and antiviral availability.
- Duration of the adjustment (a couple of months vs. six to eight months) will materially affect China’s contribution to global growth.
- If China "stay the course" in reopening and recovers by mid-year, it should become a positive contributor to global growth (possibly smaller than past contributions given other emerging contributors such as India).
War in Ukraine — economic and food-security implications
- The war had a "dramatic impact on global growth" in the prior year and was a primary driver of the cost-of-living crisis via energy and food prices.
- Europe adapted to energy supply changes, but investor and consumer confidence implications remain negative.
- Uncertainty persists around the deal on Ukrainian grain exports, food security in North Africa and other import-dependent regions, and the effects of gas market changes on fertilizer production and food security.
Debt vulnerabilities, the Global Sovereign Debt Roundtable, and Common Framework
- No systemic debt crisis seen on the horizon, but severe strain for low-income countries and many middle-income countries: "the 60% that are at or near debt distress."
- IMF priorities: provide sound analysis on debt and an institutional pathway for resolving debt problems.
- Global Sovereign Debt Roundtable launched with an agreement at the highest level; first meeting intended in February to bring together key creditors (Paris Club, China, India, Saudi Arabia, bilateral creditors, private finance) and borrowing members to improve decision-making on debt.
- Relationship to Common Framework:
- Roundtable intended to complement and strengthen the Common Framework, not replace it.
- Objectives include addressing unresolved issues: defining cutoff dates for loans, timelines from request to resolution, and transparency requirements.
- Desire to improve speed and predictability to address borrower concerns (example: Chad successfully delivered under the Common Framework; Zambia hoped to be next; Ghana deliberating).
- Engagement with China:
- IMF has engaged Chinese authorities on coordination among multiple Chinese lending agencies and on country-level debt resolution pathways (Chad, Zambia, Sri Lanka, Suriname).
- Political difficulty in China for "haircuts"; alternative approaches discussed include stretching maturities, reducing or eliminating interest payments, and other reprofiling that can approximate debt relief.
IMF institutional responses and priorities
- IMF priorities for 2023: provide sound analysis to policymakers, support central banks and fiscal authorities, analyze debt, and offer institutional pathways for debt resolution.
- Recent Fund actions (described as three areas of work):
- Expanded financial support through special drawing rights, increased access levels for PRGT countries, and creation of the Resilience and Sustainability Trust.
- Adopted a strategy for fragile and conflict-affected states (25% of IMF membership) to define the Fund's role in macro policy and financial stability for these members.
- Board adopted a climate strategy; Fund requested resources to build skills and capabilities to work on climate-related economic risks and green growth opportunities.
- IMF open to institutional discussions on instruments, access limits, and financial capacity at Spring Meetings.
Climate, energy transition, and subsidies
- Climate and debt identified as top problems requiring global cooperation.
- Positive note: Europe’s accelerated transition to renewables "30% faster than it was last year."
- Caution on subsidy competition: subsidies and protectionism can trigger reciprocal actions and lead to a "shrinking pie"; IMF advocates rational diversification of supply with economic logic rather than onshoring that creates new single points of failure.
Regional assessments and country notes
- India:
- Remains a bright spot, performing better than global average.
- Digitalization (digital ID and digital public infrastructure) is a major comparative advantage for public policy and private-sector expansion.
- India’s G20 priorities likely to emphasize digital public infrastructure and its role for growth and employment.
- United States:
- Remarkable labor-market resilience and a shift from goods back to services underpin expectations of a soft landing or, at worst, a mild recession if one occurs.
- History suggests debt ceiling standoffs are resolved; IMF not projecting a US default.
- Japan:
- Inflation around or "very close to 2% or very slightly above the 2% target"; Bank of Japan’s accommodative stance remains appropriate but the yield curve control has been tested and BoJ is reviewing its posture.
- Latin America:
- Growth positive but modest; Chile possibly heading into recession.
- Several countries acted early on inflation (Brazil, Mexico, Chile) and saw inflation peak and trim down earlier than elsewhere.
- Region characterized as "underutilized potential"—current growth around 3% is insufficient for countries with youthful populations that need higher job creation.
- Africa and fragile states:
- Urgent need for attention to countries emerging from COVID with depleted fiscal space and increased security or climate-related expenditures.
- IMF notes high-level engagement (e.g., US and Treasury outreach) and stresses global interest in preventing further deterioration that could fuel insecurity and fragmentation.
Key policy recommendations and actions
- Central banks: persist in fighting inflation while monitoring growth and employment implications.
- Finance authorities: better target and calibrate protection/support for the cost-of-living crisis as fiscal space tightens.
- International community: work to protect an integrated global economy to preserve overall performance and address problems (climate, debt) that require cooperation.
- Debt resolution: use the Global Sovereign Debt Roundtable to improve senior-level coordination, speed, transparency, and practical approaches to achieve debt relief outcomes acceptable to all creditors.
- Climate action: mobilize public and private finance to accelerate renewables and reduce long-term economic risks.
Transcript of International Monetary Fund Managing Director Kristalina Georgieva Media Roundtable, January 12, 2023 — IMF Communications Department