Transcript

Transcript of Press Briefing on the International Monetary Fund's World Economic Outlook by Olivier Blanchard, IMF Economic Counsellor and Director of the Research Department

October 1, 2009

Webcast of the press briefing

MR. MURRAY: Good day. I am William Murray, Chief of Media Relations at the IMF. This is the WEO press briefing. We are live and on the record.

Joining us today is Olivier Blanchard, Economic Counsellor and Director of the Research Department; Jorg Decressin, Chief of the World Economic Studies Division; and Krishna. Srinivasan, Chief of the Multilateral Surveillance Division of the Research Department. Mr. Blanchard will have some brief opening remarks and then we will take your questions.

MR. BLANCHARD: Thank you Bill Good morning.

Let me start with the good news. This is a first in a few WEO conferences. The recovery has started; financial markets are healing; and in most countries growth will be positive for the rest of the year as well as in 2010.

Our forecasts are for output to increase by 1.7 percent for advanced countries in 2010, by 5.5 percent for emerging market and developing countries in 2010, and so far world output to increase by 3.2 percent in 2010 (on a fourth quarter to fourth quarter basis). For those who follow the WEO each time, you can see that this is an upward revision of 0.6 percent relative to our April forecasts.

Now, this is clearly good news. A year ago, such positive growth seemed far from assured. Where we are today is the result of strong policy responses throughout the world on the monetary front, on the fiscal front, and on the financial front. Responses have supported demand, decreased uncertainty, and decreased systemic risk in financial markets. By doing so, they have led to a turnaround after the large decrease in activity in the last quarter of 2008 and the first quarter of 2009.

Now, for the less good news. For the moment, the recovery is largely accounted for by strong public spending and inventory adjustment by firms. This is true of the United States and most other advanced countries, but this is also true of emerging market countries. Strong export performance in Asia, for example, reflects in good part the restocking demand of firms in advanced countries.

Now, why is this less good news? Well, because the inventory adjustment will come to an end, and because high public spending and large fiscal deficits cannot go on forever. Debt levels are projected to reach 110 percent of GDP by 2014 in advanced countries and fiscal authorities in these countries face the additional challenges of dealing with an aging population and increasing healthcare costs. Thus, to sustain the recovery, private demand—that is, private consumption and investment—will have to strengthen, and this is clearly going to be a challenge for advanced countries. As the GFSR discussed yesterday, the danger of bank insolvency has very much decreased, but bank credit is going to be tight for quite some time.

Consumers in advanced economies, especially U.S. consumers, are likely to want to save substantially more than they did before the crisis. Turning to firms, in many countries, the capacity utilization rate is at historically low levels and so that does not augur well for investment. In many countries, also, the housing booms of the recent past imply low housing investment for some time to come.

So, if you put this together and you think that eventually fiscal deficits will have to be smaller and private demand or private domestic demand is going to be weak in some advanced countries, especially in the U.S., this implies that these countries will have to rely more on foreign demand, on net exports and, by implication, this implies that some emerging market countries will need to do the reverse, rely less on net exports.

Some of it will happen through exchange rate adjustment, but it is likely to require also more active policies, for example policies aimed at increasing social insurance, reducing saving and increasing consumption, for example in the case of China.

In short, a sustained recovery will require rebalancing of demand at two margins: first, from public to private demand; and second, from current account surplus countries to current account deficit countries. The strength of the world recovery will depend on the success of these two rebalancing acts.

Our forecasts are based on the assumption that some global rebalancing will take place but that it will be limited and, therefore, this is why we project a relatively weak recovery, especially in advanced countries.

Now, let me turn to the policy agenda implied by this analysis of the world. In this context, the policy agenda is clear and I think it is twofold. First, and very importantly, the current numbers should not fool governments into thinking that the crisis is over. Countries must avoid a premature exit from the policies they have put in place in the last year.

At the same time, they must prepare credible exit strategies. Exit from monetary policies appears relatively straightforward, involving mostly technical issues––the key challenge is to get the timing right. Exit from fiscal policies will, however, require a major effort, including in many countries major reforms of the retirement and healthcare systems. Exit from financial policies must also come with major reforms of the financial system which are now under discussion and hopefully soon on the way. This was the first point of the policy agenda.

Second, countries must also coordinate policies so as to achieve global rebalancing and, therefore, sustain the recovery. In this respect, we welcome the mandate given to us by the G-20 in Pittsburgh to assess whether national policies are mutually consistent and can deliver sustained and balanced world growth for many years to come.

Thank you.

QUESTION: I just want to pick up on two of the points you mentioned of potential difficulty in the recovery from the report, one on global imbalances where you point to the need to eventually move to floating exchange rates to make that more effective. Presumably, you are referring to China there. I wonder what your view is as to the political impetus in China for doing that and moving toward that policy, which, of course, the IMF has long urged.

Secondly, on the financial sector, again you point to the political obstacles to recapitalizing the banks and taking toxic assets off the banks in many countries, which we have obviously seen in a number of cases, not least Ireland and the U.S. I just wonder again if you felt, on all of these politically-sensitive issues, that the impetus is weakening for such reform precisely because of the recovery, even though, as you were arguing, that for long-term recovery countries need to do those things.

MR. BLANCHARD: On your two points, when you think about global rebalancing, you realize it is going to have to come from a number of measures and from a number of adjustments. It is very hard to see how this could happen at current exchange rates. In general, it is very hard to see how global rebalancing does not come with an appreciation of Asian currencies of various degrees, depending on the country. It is very hard to see how this would not be part of the package.

On financial reform and recapitalization of banks, this was discussed yesterday at the GFSR. I think the assessment of the Fund is that this is going in the right direction, but not quite fast enough and we surely would like it to go a bit faster.

QUESTION: We have had countless examples before. In fact, the current structures of the IMF are such that you are supposed to survey economies to see whether their policies are mutually reinforcing or whether they are conflicting. Can you give us some evidence of why you think it might be different this time?

MR. BLANCHARD: I think you are referring, for example, to the process of multilateral consultations which took place before the crisis and did not lead to major changes in policy. I think the difference is the crisis and I think the difference is that, this time, global rebalancing may well be needed to sustain the recovery so that the stakes are higher and I think the commitment of the countries is higher.

The crisis has changed things. We have seen the changes in terms of the decisions of the G-20 countries. So, I think both the commitment and the need are higher and I think this time we have a better chance of succeeding.

QUESTION: What is the take on the situation of Germany? As a big exporting country, it has been under much criticism in Pittsburgh. How do you think Germany will be willing to cut back on its exports?

MR. DECRESSIN: Germany has gone through quite a decline in activity but is also now experiencing a rebound. This down and up is due to the large manufacturing sector in the country. Germany has also deployed highly stimulative policies, including major fiscal stimulus, which we have applauded, and that should help boost domestic demand. In fact, according to our forecasts, the current account surplus of Germany, which just above 6 percent in 2008, is already narrowing quite appreciably during 2009 and 2010. In that sense, Germany is doing its part to help rebalance the global economy.

QUESTION: Britain swept its fiscal rules into the sea because of the particular crisis. It had quite strict fiscal rules which was just abandoned in order to accommodate what was happening.

I noticed in the WEO you recommend that countries start putting back in place some guidance and fiscal rules to bring back stability to public financing. I just wondered if you had any ideas about what kind of fiscal rules you would like to see the major economies, and Britain in particular, adhere to.

MR. DECRESSIN: There is no single recipe in terms of rules for all the countries. Britain is part of the European Union and, therefore, also part of the monitoring within the European Union of fiscal policies under the Stability and Growth Pact, which is kind of an umbrella, for fiscal monitoring. The U.K. already has fiscal rules and is considering revising those fiscal rules.

The key issue is that consolidation has to wait until the recovery has gained a very solid footing. Then it would be the task of the next government to devise a more ambitious consolidation program for the medium term that will help roll back the fiscal deficits that we are seeing right now and that have been incurred in order to support the economy. This would help keep a lid on the public debt that is accumulating as a result of present fiscal support for the economy.

MR. BLANCHARD: Let me reinforce and go beyond the U.K. It is clear that governments are facing a very difficult choice. In terms of fiscal policy, they have to do two things. First, there is no question that private demand is weak. As long as it is weak, fiscal stimulus is basically needed. At the same time, it is clear that if the fiscal stimulus were to just go on forever, there are serious issues of debt sustainability and, therefore, they have to do two things. They have to do fiscal stimulus as long as it is needed and may well be into 2010, for example.

At the same time, they have to take measures which improve the medium-term sustainability of the debt. That means reforms of the retirement system; that means reforms of the healthcare system. These reforms have basically to be confronted. The idea of just us going to put fiscal rules and not do these reforms, is a joke. The fiscal rules can help and they are very important once you have a clear direction. They make you basically stay on that path. But fundamentally, some structural reforms are needed.

QUESTION: I have two questions. First, how do you define a solid recovery? Second, here in the report you said that emerging markets should be very strong in removing stimulus earlier than the advanced economies. Can you elaborate on that?

Right now in China the big concern is maybe we will have an asset bubble, asset price bubble with price deflation at the same time. Could you speak a little bit on that, how likely it will be.

Thank you.

MR. BLANCHARD: On what is a solid recovery, it is basically a recovery where the growth rate is high. I think we have to realize that the growth rates which were obtained in the years before the crisis are unlikely to be seen in the next few years and, therefore, a bit too ambitious.

One of the studies we have done in conjunction with the World Economic Outlook in the so-called analytical chapters was to look at the effect of banking and financial crises on potential output and potential output growth after the crisis. The general conclusion is that crises lead to a permanent loss in output of some amount which has to be taken into account. Therefore, you cannot expect to go back to the old trend.

At the same time, they seem to indicate that eventually you can return to the same growth rate. So you move to a lower output path but then grow at a similar rate as in years ahead of the crisis, although not at the very high rates recorded just before crises. When will this happen? Clearly, a number of years into the future.

MR. SRINIVASAN: If you look at emerging economies generally, and if you look at China in particular, we are closer to the recovery being more entrenched and self-sustaining in China. We are closer there, but not yet. So, sooner than later, monetary tightening will be needed there. It has been recognized by the Chinese regulatory agency there could be risks of credit quality deteriorating, and so once it is clear that recovery is entrenched and self-sustaining, monetary tightening would be warranted.

QUESTION: My question is why in your strategy is not Africa included? It is a continent with 500 million inhabitants and most of them are young and not aging, so why does Africa not appear anywhere in your strategy?

MR. BLANCHARD: I am sorry. Despite the fact that you spoke French, I am not sure I understood everything you said, but it is because the microphone was not working. If I understood, your question was why do we not say more about Africa.

The fact is that Africa is one of the innocent victims of the crisis. It has suffered from lower commodity prices; it has suffered from the decrease in trade. For some countries which were financially linked to the rest of the world, it has suffered from the financial crisis. It is now slowly emerging from it and actually the growth forecasts that we have for Africa are relatively positive.

Africa as a whole is still too small a continent to make a major difference to world growth. However, the problems of Africa are very important and we discussed them at some length in the report.

MR. SRINIVASAN: I am sorry. I do not speak French so I did not get the question.

MR. DECRESSIN: Maybe to add one more point, if I understood your question correctly, it was why does Africa not figure in our strategy for recovery. I just wanted to clarify that we have, in general, tripled the resources that are at our disposal in order to help developing countries. We have also in that context tripled the resources that we have made available to African countries. We are now close to about $3 billion that we are lending to Africa, which is about three times more than what we were lending in 2008.

QUESTION: I have two questions. You talked about improvement and your statement was very positive, but we are very much concerned in Turkey because our economy is narrowing down continually, especially in the first quarter and in the second quarter. There is shrinkage. What does the report say for Turkey? How do we appear in the report?

MR. DECRESSIN: It is true that activity contracted very deeply in Turkey, especially in the first quarter of this year. However, in the second quarter, there has also been a very strong rebound in the Turkish economy. In terms of quarterly growth rates, from the first to the second quarter, growth was about 7 percent. If you annualize this, this is 25 percent. So, it has been a pretty solid rebound. If you compare Turkey to other emerging European countries, what you will notice is that the decline in activity in 2009 is deeper than in other emerging European countries. However, the recovery that we are projecting for 2010 is also stronger. So, Turkey is more cyclical, its economy is more cyclical than that of other emerging European countries, and that is because of the large size and importance of the manufacturing sector in Turkey.

QUESTION: In some ways the global recovery looks almost too good to be true, but of course a lot of the risks have been shifted, as you pointed out. If private demand does not recover very strongly, when do we begin to look at fiscal crises rather than fiscal problems? I mean, you talked about a debt-to-GDP ratio of 120 percent. Japan, where I live, has a ratio approaching 200 percent.

So, when, if at all, do we begin to see the danger of fiscal government bond market crises? Also, how concerned are you still about the state of central bank balance sheets and the possibility of inflation arising out of the situation there?

MR. BLANCHARD: You raise a very good question. In our baseline scenario, we have a large increase in debt, and I gave you the basic number. There are more numbers in the report. We think, however, that that by itself will not lead to a major fiscal crisis except maybe in a few countries.

However, what we are doing in the Fund as well is exploring worse scenarios and some of these scenarios have indeed the possibility of a fiscal crisis. If the recovery was truly to falter, if private demand was really not to pick up, and global rebalancing were not to take place, then this might be a very strong incentive for governments to continue to have large fiscal deficits and run debt to very high levels. These could, at least in some countries, worry financial markets very much.

In this case, what happens is hard to predict. My guess is that the structural reforms that were mentioned earlier would then be put in place or at least looked at much more seriously. It might take a fiscal crisis to actually trigger them or trigger politicians into action. Again, in the baseline scenario, we see very high increases in debt but not the type of fiscal crisis that you have described.

On the central bank balance sheets, we do not think that this is a problem of the magnitude of the fiscal problem. We think that in many cases the balance sheets of the central banks will be relatively easy to reduce in size as markets return to normal and we expect this to happen.

If for some reason interest rates had to be increased before liquidity has been taken out of the system, the central banks now have the tools to achieve a tightening of monetary conditions, by, for example, paying interest rate on reserves. So, we think here the problems are much more technical than political and we are fairly optimistic that they can be tackled relatively easily.

QUESTION: Mr. Blanchard, you mentioned several times this important issue of restructuring reform of the pension system. Now we have basically advanced countries with pay-as-you-go, like Germany, and you have these countries, Anglo-Saxon countries in substantial [inaudible]. Now, how does this complicate the devastating loss of value for pensioners? Particularly in Anglo-Saxon countries, how does this complicate or what are the implications long term, medium term, for the restructuring of pension systems. Would the World Bank and the IMF come back to a more balanced view on the value of pay-as-you-go systems like in Germany?

MR. BLANCHARD: I think indeed the crisis forces us to rethink the optimal structure of retirement systems. Before the crisis there was a heated debate about the pros and cons of pay-as-you-go systems versus fully-funded systems. Given the fiscal position which we have in most countries, that debate is now on the back boiler.

We are going to basically continue in most countries to have mostly a pay-as-you-go system, but the issue will be to make sure that it is balanced and, therefore, this probably implies adjustments both at the benefits, at the contribution, and at the age of retirement margins. I think the debate is going to be about these issues rather than shifting over the next few years from the pay-as-you-go system to a fully-funded system.

QUESTION: Two questions on Argentina. You mentioned in the WEO that Argentina will suffer the second worse recession in the Western Hemisphere after Mexico, if I am not wrong. In what ways you predict that forecast?

Second, you also mentioned that the government has created a Board of Academic Advisors to assess differences about the CPI results. The government just says that these Economic Advisors will not be able to change their results from the past, especially from 2007 to the present time, because no country did that. Do you expect more confidence about the CPI, given that restriction?

Thank you.

MR. DECRESSIN: On Argentina, the economy indeed experienced a steep fall. Activity, according to our estimates, declined by 2 1/2 percent in 2009. We are expecting a recovery to take hold, helped by the recovery of commodity prices, the rebound in external demand, and also stabilizing financial conditions. Thus, for 2010, we forecast growth of about 1 1/2 percent.

Now, we see significant positive growth only emerging in the course of 2010. In a number of other economies, we see such growth already emerging in 2009. With respect to your comments on the CPI, we welcome all efforts by all member states to improve their statistics, and we are very keen to learn as to what exactly the government is planning to do. Once we know more, then we will also have a clearer opinion.

QUESTION: My question is going to be about Turkey as well. As the host country, I think we deserve two questions about Turkey.

Turkey used to be mentioned with fast-growing countries right after, for example, big countries, but you compared Turkey to emerging European countries in your answer. Is it just about the location or is it estimations about the growing rate of Turkey for the near future? Why did you just mention it with them? You said Turkey’s recovery is periodical. What would be your near-future estimation? Do you think Turkey will be recovering better in the first or second quarter of 2010?

MR. DECRESSIN: We know from economics that location actually matters, because geographic proximity also indicates strong trade linkages. That is why we are comparing Turkey to other emerging European countries. Turkey is also straight at the periphery of the EU; negotiation is ongoing for accession, as you know. So, emerging Europe is a natural peer group to compare Turkey with.

As far as the growth rates are concerned, we see growth recovering to about 3.7 percent in 2010. This is after an activity decline of 6 1/2 percent in 2009. If you look at emerging Europe excluding Turkey, then you will see that in our figures the contraction in 2009 is 4.3 percent, so less than the 6 1/2 percent of Turkey, but expansion is also 0.5 percent in 2010, while that of Turkey is 3.7 percent. So, there is this additional cyclicality in Turkey on account of the big manufacturing sector.

QUESTION: Could you elaborate more on the South Asian region, how far they are affected and the recovery progress?

MR. SRINIVASAN: Asia is at the forefront of the recovery. If you look at developing Asia as a whole, we project it will grow at 6.2 percent in 2009 and 7.3 percent in 2010. There are three key reasons. One is the fact that trade normalizations has helped along with the turn in the inventory cycle. Second, policy response has been very strong, including fiscal, monetary and financial sector measures. Third, there has been an alleviation of financial stress. The impact of these three things together put Asia at the forefront of the recovery, and that is why we predict that Asia will emerge both stronger and faster from this downturn.

QUESTION: I have gone to the report and I have seen that growth for oil-exporting countries in 2009, the picture here is not very positive. I was wondering what the picture will be in 2010.

Next, I asked a question yesterday having to do with the banking sector. In April, the Global Stability Report said that credit to the economy was too high in the banking sector in Nigeria. Right now there is an ongoing shake-up, the sacking of bank chiefs and all that. I was wondering what the long-term implication for the Nigerian economy in these two areas, commodity prices and then the banking sector.

MR. SRINIVASAN: On commodities our view is that the commodity prices will stabilize broadly, and increase consistent with the recovery process. So, for oil-exporting countries, we will see a stronger pick-up in growth in 2010.

You had a specific question on Nigeria. If you look at what has happened there, growth has slowed significantly, partly related to the fact that oil production has decreased as prices have slumped and also because of financial market stress, because of which credit availability has declined.

So, we project for 2009 that growth will be 2.9 percent and will pick up around 5 percent in 2010; both monetary and fiscal policies have eased, and these have helped to mitigate the impact of the crisis. The prospects for 2010 are clearly more promising than in 2009.

QUESTION: I would like to know how do you see Latin America in this new world rebalancing that you mentioned before, and which country of the region will lead the recovery you are expecting for next year?

Thank you.

MR. DECRESSIN: In Latin America, the country that is presently leading the recovery is Brazil. Brazil is doing quite well. We are forecasting that after a modest contraction of activity in 2009 by about 0.7 percent, it will post growth rates of 3 1/2 percent in 2010.

Now, how do we see Latin America? Certainly, Latin America has come through this crisis much better than it did during previous crises and that is a testament to strengthened macroeconomic frameworks that you have in many Latin American economies.

The rebound that we are predicting for Latin America will be helped by recovery in commodity prices and the rebound in demand on account of the support of policies in Latin America and abroad, including macroeconomic policies and financial policies.

In terms of rebalancing, Latin America had a small current account surplus before entering this crisis on account of strong commodity prices. In terms of our projections, we see just a modest current account deficit emerging over the near future.

Now, can Latin America play a bigger role in rebalancing? In principle, you would like emerging economies to import capital and post noticeable current account deficits. The reason that we are not seeing this is there is partly a certain caution about not becoming too dependent on external capital, which has proven very volatile, and it is understandable.

I think for Latin America to play a bigger role in global rebalancing and, therefore, in attracting more investment and in consuming more, further domestic reforms are needed. Also we have to continue thinking about how we will reform the international financial system to give countries assurances that, if and when capital suddenly turns, there is help available to fill emerging gaps.

QUESTION: If we turn the clock back to the WEO of late 2006/early 2007 we would have found that the Fund was talking then about high commodity prices, about misaligned exchange rates, and about global imbalances. What do you think has actually changed in global fundamentals in the past two years? If, as you might think, not much has changed and banking systems remain pretty much unreformed, how would you assess the possibility that what we are seeing now is just a “false dawn,” a period of brief calm before another crisis.

MR. BLANCHARD: I think the difference between 2007 and today is, if you go back to 2007 and caricature the conclusions which were reached at the time, the idea is that the U.S. should save more and Asia should save less. Now, what has happened, not exactly in the way we dreamed of, but it actually happened, is that U.S. saving, at least private saving has increased a lot.

Public dissaving is still very large but will have to be phased out. So, in a way, half of the adjustment has taken place at enormous costs for the world in terms of a large recession in the U.S. and in the world. I think the way in which the current situation is different from 2007 is that we are now in the middle of the river and we have to cross it and do the other half. That is the fundamental difference between now and 2007.

QUESTION: There are several studies that say that India and China and other countries that do not follow the IMF and the World Bank economic programs have seen more of their people lifted out of poverty during times of growth compared to others that follow the IMF and World Bank advice. How do you see such studies as influencing the IMF? My second question is what can emerging markets learn from this crisis?

MR. SRINIVASAN: India does not have an IMF program and neither does China. Now, in Africa, we have seen a lot of progress recently in IMF programs. There has been a lot more macro stability, and so on. Growth has picked up in these regions. The reason why you have seen many of these African countries or also emerging economies deal with the crisis better than the past is partly because of the strong macro framework put in place in response to previous crises. Our programs in general have also led to a lot of poverty alleviation.

So, if you look at our programs, they have led to macro stability in many of these countries, both in Africa and elsewhere. Partly because of that, they have been able to deal with this crisis much better than in the past. So, in some sense, programs have worked in Africa and elsewhere, but, again, we learn from these programs and adapt and modify our programs to better suit the need.

MR. DECRESSIN: Let me just add something to the question, because it seems you are implying that in IMF programs we do not take care of social policies. I would encourage you to look very carefully at the programs that we are implementing in Eastern Europe right now and the specific components of the programs. You will find that they all contain measures to protect social expenditures from cuts or in some cases to beef up social expenditures to alleviate the fallout of the crisis.

QUESTION: You mentioned that emerging markets in this crisis confronting the weak demand and even consumption in advanced economies like the U.S., most rely less in exports and more in internal consumption. How could it be done if they cannot before? Has this just pushed to go to exports, and inside there are fiscal constraints and fiscal income has been decreasing because of the crisis.

MR. BLANCHARD: I think the crisis is going to force a number of countries to re-examine the emphasis on export-led growth. Surely, it has shown at the minimum that when the rest of the world does poorly, these countries are very strongly affected. One of the characteristics of this crisis is that a decline in output has been the largest in the emerging market countries which specialized in medium-tech and high-tech manufacturing. These countries have been badly hurt. That is surely one reason to rethink the general strategy.

In general, again, for the world as a whole, not all countries can have export-led growth. That is just a physical impossibility. Therefore, in the context of this rebalancing, we have to think about where the export-led growth model should not be abandoned as it has been very successful, but modified, and in a number of countries I suspect this implies probably smaller current account surpluses, less net exports.

The way to modify the export-led growth model is to move partly from external demand to internal demand. Another way of saying this is to increase domestic consumption at the expense of exports.

QUESTION: My first question on the prognosis of the IMF. What are the developments as regards the ex-Soviet Republics like Russia, Azerbaijan. My second question is what are your expectations regarding the oil prices. Also, you have been talking about bad scenarios. What do you mean by bad scenarios? Do you have a real expectation that they would arise?

MR. DECRESSIN: The region of the Commonwealth of Independent States has been particularly badly affected by this global recession. It was hit on several fronts. The large decline in commodity prices was the first. Capital outflows was the second: many of the countries in the Commonwealth of Independent States had relied on strong capital inflows in order to fund booms in energy sectors but also general business. The third is, of course, the large decline in international trade. So, they have been hit by a trifecta of shocks and therefore very badly affected.

Now, for Russia specifically, we are seeing activity contract by about 7 1/2 percent, which is very deep, in 2009 and then a recovery taking hold in 2010 with growth of about 1.5 percent, thanks to strong stimulus measures and the recovery elsewhere in the world.

Commodity prices do play an important role. We do not develop an independent forecast of commodity prices. What we do is we use the information in markets to extrapolate the price from what the markets predict and that is what our projections are based on. Based on that information, oil prices for 2009 in our projections are assumed at just above $60 per barrel and for 2010 just above $75 per barrel. So, this will be helping a number of the CIS economies.

In general, Russia is very important for the CIS. The deep decline in Russian activity is affecting a number of other countries around Russia that are less involved in energy exports, on account of lower remittances and lower trade with Russia.

So, in the end, it is a region that is badly affected, but we also see a recovery taking hold, as in other parts of the world, although it will take a little longer in the CIS to fully materialize.

MR. BLANCHARD: There was a question about bad scenarios so let me clarify what we do. The WEO gives you a baseline scenario, the most likely scenario. The focus of the WEO is to say this is the most likely scenario.

Now, at the Fund we have to do much more. We actually have to think about what could go better, what could go worse. It is fairly easy to think of things which can go worse, a new banking crisis, a fiscal crisis, the swine flu becoming really bad, an earthquake somewhere. Make a list. What we do inside the Fund is to think about the implications of these alternative scenarios.

This we are doing now in the context of a new exercise which we were asked to put in place, which is called the early warning exercise, in which we examine these possibilities and try to think about what can we do to decrease the probability of bad events and, if they were to happen, what can we do to respond to them. The WEO tries to focus much more on the baseline, on the most likely scenario.

MR. MURRAY: Okay. I am going to have to wrap this up. Just a service note. At 1 p.m. Istanbul time today, we will also be releasing the G-20 Surveillance Note. That was a note that was prepared by the Research Department principally and given to the Group of 20 Finance Ministers and Leaders for their recent deliberations. We are going to be releasing that publicly, as I said, at about 1:00 Istanbul time today.

I want to thank Mr. Blanchard, Mr. Decressin, and Mr. Srinivasan for joining us today. Thank you all and stay in touch.