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- [00:00]
A
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Bloomberg Audio Studios Podcasts Radio News thank you so much, Matt. I am here with Kristalina Georgieva, the managing director of the International Monetary Fund at a time when the world leaders are all coming together. We spoke back in spring and you seemed just a little bit more concerned. So did everybody here. There seems to be a more optimistic tone. Why is that?
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C
Because since the spring meetings, we have seen the world economy being quite resilient. Very important. We have seen countries acting responsibly towards their own interests and the interests of the world. Let me unpack this one. We have upgraded our growth projections since April. Why? Because performance across the world is quite strong. Why is it strong? Because the tariff shock from the United States is not as dramatic as we feared in April. In April, if you recall, the announced tariffs were 23% today. US tariffs nominally 17 and a half percent, but what is being collected is somewhere around 9%. So smaller shock from the US to what did the rest of the world do? With the exception of China and initially Canada that retaliated against the United States, the rest of the world said, not tit for tat. We are not going to engage in retaliatory action. So we have 191 members, 188 of them decided to trade by the rules that exist. And the third very interesting thing is you now see the value of strong fundamentals. Countries have built good institutions, they have built good policies, especially in the emerging world. Now we are seeing the pay back from that investment.
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B
So is this the reason why you think that it's legitimate for the market to be looking through some of the recent flare up in tensions between the US And China? Because ultimately trade keeps going and the world has sort of shown that it isn't really willing to escalate to that degree.
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C
That is exactly the reason why everybody's calmer. Even if China US Tensions go up and down because there is no spillover. But let me say this. We shouldn't be complacent. What we see is that Chinese goods that used to come to the United States are now redirected to Asia and to the European Union. If this recipients of Chinese goods feel the heat and decide that they too should impose tariffs, we may still have the risk of a trade war moving from one place to another. So our message to everybody's be calm and to China, be careful, do not provoke other countries to see you as a threat to the economies.
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B
You talk about emerging markets, the resilience that we've seen there. You talk about the potential lack of resilience in the developed world because of the fiscal overhang. Are you starting to see e like dynamics in the developed world?
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C
When we look at the prospects for the world economy, they're underwhelming, whelming. Growth is slow, debt is high. And who leads on the debt front? Advanced economies, they have borrowed to meet the needs of people during COVID when we had the shock from Russia's war in Ukraine. Now they need to pull back what they're providing a support and it is very difficult. People like receiving, they don't like losing what they have got. So we see see everybody recognizing that debt needs to go down, that fiscal consolidation needs to take place here in the United States. Secretary Benson says we need to get to 3% deficit. But acting on these intentions is hard. Where I want to shout bravo to Italy. Traditionally Italy was a country that was seen as having real difficulty to tighten up. Now they are very likely to go below 3% deficit next year. So there are some bright spots. Greece is a fantastic story. There are some bright spots, but still bright spots on a dark horizon.
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B
Well, and they had to get to a pretty dark place before they got to that bright spot. And I do wonder, I mean, how much it's screaming into a void, you know, reduce your debt and everybody wants to keep getting their benefits. But I do wonder whether you see the ramifications of this in the price of gold. Gold, in this conversation that we have here about the debasement of the dollar. Do you think that those threats are real?
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C
The price of gold is going up because uncertainty has shot up and it is staying very high. What do you do at the time of uncertainty? You try to anchor yourself in something that has proven value. When we look at the dollar over decades, the share of dollar in reserves globally has gone down somewhat, mostly because other countries have presented a good alternative. But they are all medium sized countries. Australia, Sweden, Switzerland, even Eurozone is not that big to present an alternative to the dollar. And we need to remember people go for the dollar because of the depth of the capital markets in the United States, the liquidity, the size of the economy, the productivity of the American worker, which is unmatched in other advanced economies. So yes, it is likely with as the world becomes Multipolar. It is likely to see this strength, but it is a slow, slow, slow process.
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B
I also want to ask you about Argentina. The US recently had this $20 billion swap line. How is the IMF involved in that effort, if at all?
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C
We work hand in hand with the Argentine authorities and with the partners of Argentina, first and foremost, U.S. treasury, because of the size of their support, but also the World bank, the Inter American Development bank. And we do it because we see a genuine change for the better in Argentina over the last two years. What have we seen from negative growth to four and a half percent this year and this is slower than last year. Inflation from triple digits down to 28%, deficit gone instead of it. That is surplus, very important. Poverty trending down. And that means that there is something happening in Argentina that is good for the future of Argentina.
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B
If Javier Milei does not win the election, do you still have that optimism?
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C
Well, he will be there. He will be the president for some time to come. And I think that there is a still fairly strong support in Argentina for getting the country to be a normal economy in which regulations are meaningful and for purpose. That is a very big regulatory house cleaning, cleaning that is taking place in Argentina. So I expect that even if we are in a somewhat different place and frankly we, we don't deal with politics, it is for the people of Argentina to decide. But when you look at the strength of the economic position of Argentina, it's good to sustain the country going on that path.
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B
Kristalina Georgieva, thank you so much for taking the time. Always a pleasure to speak with you. That was Kristalina Kirkeva, the managing director of the International Monetary Fund here in.
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