Transcript

Transcript of IMF Press Briefing

January 30, 2020

MR. RICE: Good morning everyone and welcome to this press briefing on behalf of the International Monetary Fund. I'm Gerry Rice of the Communication Department. And as usual, our briefing this morning will be embargoed until 10:30 a.m., that's Washington time.

This is actually our first press briefing here at the Fund of the year. Though as you may have seen, the IMF has been actively communicating on a number of fronts this month already, including last week when we launched the update on our World Economic Outlook which I'm sure many of you have seen.

Anyway, let me just give you a couple of announcements about upcoming communication events and then I'll turn to colleagues in the room. And I'm already seeing some questions online and I'll take a couple of those too. Later today, the managing director Kristalina Georgieva, will have a one on one conversation with Masood Ahmed who is the president of the Center for Global Development here in Washington. That's going to be from 4 till 5. Media are welcome to attend, and it will also be webcast, so you'll be able to look at that, that's today 4 o'clock, Washington.

And then next week, February 5th, Kristalina Georgieva will travel to Rome where she will deliver a keynote address at a conference organized by the Academy of Social Sciences and that's actually at the Vatican. And you may have seen that has been a bit in the new also. So, that's February 5th next week in Italy.

Let me just say that following that trip to Italy, the managing director will also be traveling to Germany for the Munich security conference. She'll be in Dubai for the conference on women's equality and empowerment there. And then she will be traveling on to Ethiopia. This is all going to be later in February.

And at my next briefing, I'll give a bit more detail on those trips. That trip will end in Saudi Arabia where we have the meeting of the finance ministers for the G-20 which is going to be in Saudi Arabia this year. So, that gives you a little bit of the sense of the managing director's travel and events trajectory over the coming month or so. One other item. From February 4 to 11th, our deputy managing director, Tao Zhang, will be traveling to Botswana and Mozambique and various public events there including meeting with the authorities and officials in both countries.

I'm going to turn to your questions in the room and I'm seeing some questions on screen, including on the coronavirus which, of course, is very much in the news today. And I'm seeing our colleague, Delphine, from AFP is asking about that. But there may be some questions in the room about that too so let me take those.

MR. INU: Thank you very much, good morning. This is reporter Gabriel Inu (sp?) from China's Central Television CCTV and China Global TV Network CGTN. My question is about this ongoing outbreak of the new coronavirus that people are starting alert about economic this might have. So, I wonder how does the IMF evaluate so far, the responses that China's authorities have taken and whether there are advices on possible stimulus measures in the future. Thank you very much.

MR. RICE: Okay thank you for that. And that's broadly the question Delphine had also about the economic impact, so I'll tie that in. Did you have something on coronavirus?

SPEAKER: I was going to ask about the same subject in a slightly different way. Can you talk a little more broadly on the global role of the IMF about how that fits in with the IMF's capabilities for tracking economic activity, monitoring financial stability? Even kind of maybe more detailed things like supply chains and things like that and what the IMF's monitoring facilities can be doing or what they may be doing already. Thank you.

MR. RICE: Yeah. So, thank you for those questions. I think I want to start, I think the right place to start is by saying that, of course, together with all the membership of the IMF, we would like to express our deep sympathy to the people in China and other countries who have been affected by the new coronavirus. We have been closely following the developments and you may have seen Kristalina Georgieva has made some comments, including just a few a day or so ago about, you know, it being very early, too early really to quantify in any precise way the economic impact.

And, you know, I think I want to really emphasize that point of just how much uncertainty there is at the moment. The economic impact will depend very much on the behavior of the illness itself, the virus. How fast it spreads, who it affects and how quickly the contagion will run its course.

And, of course, we look to organizations like that World Health Organization for its expertise in this area. Again, as I said, a lot depends on the behavior of the virus itself. So, we're closely monitoring the findings and updates as they are communicated by the Chinese authorities and the WHO.

It may help if I can, you know, just give you a sense of our thinking. Again, given this is relatively early days and the uncertainty that I just emphasized. But we tend to look at it in terms of direct effects and indirect effects. So, we've seen the direct impact mostly on demand as people have stayed home in China. And usually what is usually a very busy retail and tourism season has essentially come to a halt. At the same time, on the supply side, there have been production stoppages, transport delays and frictions and workers staying home.

On the indirect, more indirect effects, there is some evidence of this having an impact through confidence and the uncertainty that I mentioned. For example, Chinese financial markets remain closed for the Chinese New Year holiday. And we've seen some of the uncertainty about the impact reflected in equity and bond markets elsewhere this week.

Again, how large the impact will be exactly is hard to tell at this point. So far, it seems most severe in the region at the heart of the outbreak in Hubei Province where economic activity has slowed considerably. Hubei Province represents about 4.5 percent of China's GDP. So, this is one, again, potentially very direct impact on the economy and we expect that the extension of the new year's holiday transport restrictions, public safety measures et cetera, will impact sales and economic activity in China.

Now all of that said, we would also expect that much of these effects could be temporary and be reversed once the virus retreats. As roads and airports open up again, people go back to work, and firms make up for lost business. So again, you know, a lot of uncertainty and very difficult to quantify. And the overall impact on the Chinese economy will depend on how long it will take before we get to that point of reversal.

If the virus retreats quickly, the impact will likely be small. And in that respect, similar to the SARS episode where most experts agree that annual growth took a relatively small hit at that time because it was reversed. So that’s the, that's how we look at the impact on China. Let me just say a word about the, maybe the broader impact on the global economy.

Obviously, the impact on China has a relating to the impact on the rest of the global economy. If it’s a small impact on China, the relative impact on the rest of the global economy would be smaller.

Here, we are looking mostly at a reduction in the number of Chinese people traveling aboard, the slowdown in imports along with domestic economic activity. And given the close ties, China's close ties with the region, Asia would likely be most affected.

Again, there is a risk that these spillovers could be larger and reach further. We just don’t know at this point. We at the IMF are monitoring this very closely. We are looking at economic indicators on a real time basis. If global supply chains were systematically affected or global financial markets were significantly impacted by increasing uncertainty, then obviously the impact would be greater.

So we are monitoring this as I said in real time and we are not at this point in a position to put any hard numbers around this, that’s something that we would do in due course but it's just too early to do that. And it something that we will be taking into account as we issue our periodic economic assessments.

For example, we have the G-20 meeting coming up which I mentioned. So we will have an update on our economic assessment at that time so it's possible we will be able to say something a bit more specific and concrete then. And of course, we have our World Economic Outlook process that’s ongoing and we will be publishing in due course.

There was a question about the Chinese government response. Clearly, the authorities are taking this very seriously and China is a large economy with the resources and the resolve to effectively meet this challenge. We think it's very helpful that the authorities, the Chinese authorities are working closely with the World Health Organization and others including by sharing information about the disease and the measures taken.

In terms of policy response, again, I think the right priority is getting help to the people who have been affected, that’s what the authorities are doing is my understanding. And this is including some increased spending on public health services and prevention to help address and contain the outbreak.

China has the fiscal space to act if needed. It will also be important to make sure that households and firms have access to credit to bridge over and temporary difficulties. And again, this is something the Chinese authorities have indicated they will be doing.

And then whether additional, you asked about fiscal stimulus whether additional fiscal stimulus is needed once the economy is on the rebound will depend on the speed of the recovery and the impact. And, you know, I'm sure the Chinese government and the Peoples Bank of China will be ready to act when the time comes.

Finally, then back to the IMF, I mention how we are monitoring it, how we will take into account the economic impact in our upcoming forecasts. And again, let me just return to what I said at the beginning that all our sympathies to those affected. And I know I speak for the IMF membership to say that, you know, we stand ready to help and do as much as we can. But we are very much in the hands of the experts here at the World Health Organization and of course the Chinese authorities themselves.

That was a bit lengthy, sorry for that but that’s about as much as we have right now. Anything else in the room? Okay then. Let me turn to a few things that are online.

There is one question on Zimbabwe which I will take. And it's from Industry Focus of Zimbabwe, Clements Mercado. Zimbabwe recorded an economic dip last year. What are your prospects for the country this year and what should the country do to improve its growth?

The IMF has a staff monitored program with Zimbabwe. We had a mission to Harari in December to conclude discussions on our regular annual economic consultation, the Article IV. And Kristalina Georgieva actually met with the finance minister of Zimbabwe just a few days ago in Davos and they discussed latest economic developments there too. So we are in close contact with the authorities to assist and coordinate reform and stabilization efforts.

On Zimbabwe's economic difficulties, they have continued through 2019. Our preliminary estimates and this was the question indicate that GDP growth in 2019 will be steeply negative as the effects of drought on agriculture and electricity impact, the impact of Cyclone Idai and policy, some policy missteps present headwinds to the economy. But again we are engaged with Zimbabwe and looking to support Zimbabwe and the Zimbabwean people as much as we can.

There is question on Lebanon and that is from Lebanese news agency, the Al Mudon news website from Shahir Idris and asking an IMF official visited Lebanon. Did the Lebanese finance minister request financial aid from the IMF?

Just very directly on that last question. The Lebanese authorities have not requested financial assistance from the IMF.

On the rest of that question, the alternate executive director from the IMF did indeed meet with the finance minister last week, that’s our alternate executive director representing Lebanon here at the Fund. This was a courtesy visit by our executive board representative to the minister.

And just for those who don’t follow the Fund so closely, I just want to distinguish the visit from the representative of our executive board, distinguish that from the IMF staff, okay. For those of you who know the Fund, you know the difference between at the board and the staff.

And maybe just to clarify because there was some, I did see some press reports that didn't get this quite right. As I said there has been no request for financial assistance from the Lebanese government to the IMF.

However, we are providing technical assistance. So no financial assistance but we are providing technical assistance which means, you know, economic advice and expertise, training, support for institutions and so on. So I just want to distinguish between those two things.

There is a, there's a question on Argentina from El Cronista Commercial, Marie Iglesias, asking what is the main objective of the mission? That's the IMF staff mission that will visit Argentina in February. So we have a very active ongoing dialogue with Argentina, we share the Government's objective of putting in place policies that can stabilize the economy, protect society's most vulnerable, and pave the way for sustainable and inclusive growth.

The IMF Mission Team met with Minister Guzman this week, you may have seen statements out of that meeting, both sides, Argentina side and on the IMF Staff side, describe those meetings as very constructive, very positive.

Kristalina Georgieva will meet with Minister Guzman when she attends that seminar in Rome at the Vatican that I referred to at the beginning of the meeting, so that's going to be next week.

And as the question suggests, indeed an IMF Mission is expected in Buenos Aires in February, and that will be to continue to exchange views on the macroeconomic plans, and debt sustainability analysis as relates to Argentina. So the Mission will be looking to hear from the Argentina authorities on their ideas and their plans going forward. I think that's about as much as I have on Argentina.

There is a question about the Fed, and does the IMF have a statement on the Fed, the action the Federal Reserve announced yesterday, to which I can say we support the actions the Federal Reserve is taking to fulfill its mandate of maintaining price stability and fostering maximum employment.

And we are reassured by Chairman Powell's statement, yesterday that the Fed's overarching goal remains one of sustaining the economic expansion in the U.S. with stable prices for the benefit of the American people.

And I will take one more question online. I'll come back in the room brief if there isn't anything. The question is on Somalia: What are next steps for Somalia's debt relief?

So where we stand with Somalia is that we had a press release the other day, just the other day, January 27^th, that indicated the IMF Staff have reached what we call a Staff-level Agreement, on a new three-year macroeconomic reform program, that could be supported by financing from the IMF and that should enable -- you know, that financing arrangement with Somalia will be approved at what we call the decision point for the HIPC Initiative.

The HIPC Initiative is the initiative for highly indebted, poor countries, HIPC, so that IMF financing arrangement would be agreed at the decision time, the decision point for the HIPC.

So, next steps on debt relief. We are working with partners, The World Bank, the African Development Bank, and of course the Somalia authorities to help Somalia reach that HIPC decision point on debt relieve as soon as possible. It's a priority for the IMF, and the process is advancing well. Clearly Somalia needs greater access to external financial resources to address its large development needs, and to reduce poverty.

At the moment Somalia's access to those resources is limited because its debt is currently too high, and it's in arrears to its creditors. So, that why that decision point on the HIPC is important, because that will enable Somalia to clear those arrears, and normalize its relations with the international financial institutions, and that then will unlock access to significant new financial resources to address Somalia's development needs. And then it will also begin to benefit from debt relief.

So, those are the next steps. I don't have a date for that decision point on the debt relief for Somalia. We are running as fast as we can to help Somalia get there. As I said the process is advancing well, and we hope we'll have more news on that in the near future.

So that's it online. Is there anything else in the room? Yes?

QUESTIONER: I'm wondering if we could go back to Australia. I know you assessed this before.

MR. RICE: Sure.

QUESTIONER: But could you just give us a little update on what's happening, and where you're monitoring of Australia, and what the development might be?

MR. RICE: Sure. So, I'll take this as the last question. Again, first things first, we express our deep concern and sympathy to Australia and its people impacted by the bush fires. And like the previous issue in some respects it's premature to speculate on the potential economic impact of this ongoing crisis in Australia.

We see the economic impact at this stage, and again, given what I've said about uncertainty, but we do see the economic impact as manageable by the Australian authorities, but of course it's growing, the problem is growing. But at the moment we see it as manageable, from the economic standpoint.

So far, our understanding is roughly 10 million hectares have burned. And of course, again the loss of life, we are expressing our sympathies for that. Drought and fires, the combination has impacted agriculture particularly, costing what we estimate as losses of about 0.2 percent of GDP in 2019 and 2020, thus far.

We have not yet been able to assess the economic impact on tourism and business confidence. We believe the government has more than sufficient fiscal space to be able to respond in terms of additional support to businesses and families which have been impacted.

So, again, I want to stress the uncertainty and the premature nature of making any sort of defined -- definite, specific assessment of the economic impact, but it's something we're monitoring closely, and we will keep you posted as we go forward.

Okay. I'm going to leave it there today. And thank you for coming. And thanks to the colleagues online. And we will see you back here in a couple of weeks' time. Okay. Thanks very much, everybody.