Debate on the Global Economy

issues facing the global economy joining me is christine lagarde she is the ecb president managing director of the imf crystalina gorgieva the chair of the federal reserve jay powell and from indonesia the minister of finance sri lanka and then joining us remotely we've got the prime minister of barbados mia motley who couldn't be here today and she is in sunny barbados we're all jealous and we're happy to have everyone here the most powerful women in the economy and chair powell welcome so we came here today and we thought we were going to be discussing this year the recovery from a brutal two years of covid and instead we've got the russian invasion in ukraine we have that influencing prices and inflation we have a dramatic shift in policy and we have some aggressive lockdowns in china and all of that is distorting and depressing the global economic outlook so so maybe madame md if you could just kick it off and set the stage for us because you did cut your outlook for the global economy this year and it sounds like you're going to be cutting it more so how much of a slowdown are we facing it is quite significant last year we were doing quite well 6.1 percent growth we were projecting slightly less but still high for this year nearly 5 and then we got omicron first revision downwards and the war in ukraine second more significant revision downwards would there be more it is to be seen it depends on how long the war is going to last how effective policy makers are going to be to deal with inflation without slowing down growth and is there something else to hit us we do live in a more shock-prone world if anything we like we learned in this two years is that we have to be more agile to build more resilience to these shocks and one of the objectives of us meeting here in washington is to talk with each other and identify what is the policy combination that can deal with these short term challenges without jeopardizing longer term sustainable growth well we do have a good mix of fiscal and monetary leaders here on the panel so so just to follow up quickly madame md as far as the outlook and the deterioration how close are we to something like a global recession well we're still very much in positive territory growth projection for this year as you said 3.6 let's remember that was the average growth rate between 2011 and 2019. we have only small handful of countries that are in negative territory among them ukraine devastated shrinking by 40 percent russia very significantly in fact impacted 11 below what we projected in uh october but most of the countries are growing although slowly what is the big problem uh sarah the big problem is that the exit from the pandemic induced crisis is now slowing down for the future just one number emerging markets in developing economies will be still six percent below their pre-pandemic trend in 2026 this is two years or more delay in their recovery what is my biggest worry with food prices energy prices up with prospects for recovery much worse are we going to see the phenomenon from 2019 people on the street undressed creating more difficult environment for policy makers to do the right thing yeah we're going to get into some of those risks but i do want to hear that the individual outlooks especially from europe president lagarde because of its proximity to russia and ukraine the spillover effects that that you're seeing and now there are concerns about stagflation there and the effects where it depresses economic growth and drives up prices so how much has the outlook for europe changed it has changed exactly in the same direction as indicated by cristalina so it's been a haircut to growth projections and it's been a rise in the inflation numbers and certainly when we look at the risks uh they're skewed to the downside for growth so there might be more cuts to come and to the upside for inflation that's where we are and it's particularly saddening not only because of the death not because of the destruction not because of the devastation which in and of itself is a cause for huge concern and sympathy and support for the people of ukraine and blame for those who took the initiative of that unjustifiable invasion russia but it's also causing harm throughout the world predominantly in europe for the moment but it will you know there will be ripple effects going way far you know way beyond europe for the moment as you said geography plays a role and and europe is literally next door ukraine is is is one of us and uh and taking taking this horrible hit we are seeing refugees out of ukraine into many of our european uh shores and countries and and we have to by solidarity do everything we can to support them that's the situation that we have at the moment in europe it is particularly saddening as well to see that the recovery that we were embarking uh on is is being stalled to a certain degree by what is happening uh out there what if europe takes another step and and does ban russian oil gas and coal what would happen to the european economy well let me just first of all uh salute the sanctions that were decided on a pretty global basis sanctions against the oligarchs sanctions against the family members and the people at the origin of this um an unjustifiable war um d swifting of about 80 percent of the banking sector of ukraine of russia and also freeze of the assets of the national central bank of russia that could be identified outside of russia and a couple of other countries so these this bulk of you know there were five uh set of sanctions decided one after the other has clearly had a massive impact on russia and and will continue to have an impact and i think we will the more it's rolled out the more impact it will have obviously the next question that everybody is agitating and considering is what happens with the oil on the one hand the gas on the other hand i think the issue of coal has been addressed by the europeans together who've decided to ban coal coming out of russia and you know i think it's it's a process and i would not exclude that there'd be more decisions to come as as it unfolds chair powell the u.s has been a relative bright spot in the global economy but now policies are changing as you know to address inflation and there are concerns globally about the tightening of monetary policy what's the u.s outlook and and how are you feeling right now about your claim that we're not heading toward recession i guess i'd start by saying that we are unified with our allies around the world in opposition to the in the invasion of ukraine for no reason and the human suffering that's going on there and while while these economic matters are important there are there are very fundamental things at stake there that we we want to keep in mind um so in terms of the u.s economy we are a bit more remote from the immediate in fact effects of of the war uh compared to europe for example uh but we will be feeling them over time and they will come in the form of upward pressure on inflation further upward pressure and a bit of downward pressure on on output but the us economy is is very strong performing very well by most forecasts we'll have another strong growth year this year the labor market is extraordinarily tight extremely tight historically so and to the point where uh where uh really there's an imbalance between uh between supply and demand for workers and of course the big the big issue that we're very focused on is inflation and getting inflation back down to our two percent goal but if we start to slow materially in our economy will you stop tightening even if inflation is still above your target well so um first of all uh you asked about about a soft landing uh you know basically that's our goal our goal is to is to is to get demand use our tools to get demand and supply back in sync so that inflation moves down and do so without a slowdown that amounts to a recession that's our goal and i i don't think you'll hear anyone at the fed say that that's going to be straightforward or easy it's going to be very challenging we're going to do our very best to accomplish that and it's it's absolutely essential to restore price stability without price stability really the economies don't work without price stability we need that to have a strong labor market for an extended period of time we need it for financial stability so we must do that the market has three 50 basis point hikes coming at the next three meetings as of this morning is that reasonable so i i don't i try not to comment on specific market pricing for things but i i will just say this uh at our last uh meeting and this was in the in the minutes from the meeting many many on the committee uh thought it would be appropriate for there to be one or more 50 basis point hikes are you one of those people i don't disclose my own path i try to i try to lead the committee but uh so i think um i think markets are are processing what we're saying they're reacting appropriately generally but i wouldn't want to bless any particular market pricing the thing i want to say though is we really are committed to using our tools to get two percent inflation back and i think if you look at for example if you look at the last tightening cycle which was a two year string of 25 basis point hikes from 2004 to 2006. inflation was a little over three percent uh so inflation is much higher now and our policy rate is is uh still more accommodative than it was then so it is appropriate in my view to be moving a little more quickly and i also i also think there's something in the idea of front end loading whatever accommodation one thinks is appropriate so so that does close point that points in the direction of 50 basis points being on the table certainly we make these decisions at the meeting and we'll make a meeting by meeting but i would say that 50 basis points will be on the table for the may meeting minister miliani are you more worried about what fedshire powell is doing or about what we're seeing in china right now with with these aggressive lockdowns because of covid as it relates to your economy and the region and emerging markets well united states and china are the two biggest economy in the world whatever happened in these two economies definitely have a spillover to the rest of the world first i think what chairman powell mentioned about the challenge to stabilize the price inflation down definitely will require monetary tightening and that has been communicated we are talking about well calibrated well communicated well planned so even though we cannot afford that direction of policy at this market as well as many policy makers in the emerging country and developing country need to prepare for this eventuality i think that's one very important thing in indonesia case uh back in paper times room in 2013 our situation today is much much stronger back than our external balance the balance of payment in a current account deficit and that's why even when federal reserve has not yet moved announcing it it's already creating a huge jittery today indonesia again because of the the war unfortunately but then creating this high commodity price indonesia has quite a significant commodity which is enjoying this high price it is not appropriate morally wrong if i'm saying that we are having the benefit of this situation but it's our export grew by more than 24 last year and in this first three months is actually growing even higher than that so we are enjoying surplus on trade account as well as on my budget so we are in a position of strong uh position in which then this kind of situation uh hopefully we are going to be much less affected although capital outflow is happening already on a bondholder in indonesia and in this case we've already reduced the exposure of the foreign ownership on our bonds to less than 18 this is significantly reduced and originally 40 percent so create stability china situation with the coffee and the policy of lockdown definitely create a lot of concern regarding their uh global their growth outlook although in this past today we heard from central bank governor yigang that they are going to do all necessary to make the growth at least still continue strong enough at the level that definitely also create a little bit comfort but the implication is going to be very deep i mean in indonesia we implemented this lockdown when we have delta variant only two weeks and it really erased the growth on the first course quarter last year to almost to the negative territory so i can imagine that if you prolong this kind of lockdown it will definitely have a huge especially for a city as big as shanghai in this case so within that concern uh we are not comparing which one is actually having a bigger impact but this two very important country will definitely have huge impact for many developing and emerging countries and this is on top of still very difficult recovery for many countries in the world from this pandemic although indonesia output is already surpassing the pre-pandemic level so we've already 106 above uh the pre-coffee level but indonesia is a few cases many secular struggles as crystalline mentioned they are still under the pre-pandemic level do you have a sense of how much the the china lockdowns especially shanghai and shenzhen that we saw are holding back supply chain even more at this point well that's definitely i mean they are among the biggest part uh which and for indonesia as well as in asia i think china demand for many commodities very very important so either this is going to be disrupt the supply chains within china that is half the repercussion for the rest of the world or in this case have a direct impact in terms of the demand for commodity and other raw material so that is really a a concern prime minister motley haven't forgotten about you definitely want to hear from you i think you win the award for the best growth forecast from the imf this year right 11.2 percent growth tell us what you're experiencing obviously there's a big tourism boom but you've heard about all these headwinds and i'm curious how you're affected by it and what what you're most focused on yeah i think that the figures you quoted are what we are hoping for growth to next this coming year but like everywhere else we are going to have to probably moderate because of the very very important challenges in the world and of course we're not only talking about the war in ukraine but we're also talking as you just referred to to the difficulties as a result of the china um for us it is probably the is more of a supply chain problem because excessive demand hasn't really come back as we would like um our economy fell by about 14 percent in 2020 as did all of the tourism and travel dependent economies in the world in the first year of the of the pandemic what we are seeing is literally an increase in inflation um by the end of last year inflation was regrettably up to almost six percent from just over 23 um before so when that is now compounded by the war in ukraine and the supply chain problems again with the lot long in china we expect to see continued inflationary pressures and then when you add to that the the tightening of monetary policy that's going to be worse for us because you have to recall that unlike other countries the only thing we could really do was literally to increase debt we don't have the benefit of the fiscal and monetary relaxation that europe and the uk and the us were able to do so successfully in the middle of the pandemic we don't have those options and that is why for us the whole injustice of the moment probably relates to the fact that the enormous covert debt that we've accumulated has now also to to limit the space that we have to be able to fight inflation because in small economies such as ourselves small open economies as you know um the only way we can cushion inflation is by expanding um our fiscal position to be able to to buffer people so these things are truly concerning to us the issue of the debt is even more so and let us compare as i have done for the last two years the ssi and the common debt framework as against what had been done by the g7 countries and let us also reflect on the fact that we're not going to be serious unless we bring the non-price club actors to the table the private sector has to come and we're not going to be serious until we address the issue of the climate crisis and the funding that's necessary because at the same time that we're facing all of this we have less than 12 years to adapt to our very very very likability of a 1.5 degree world but even if it doesn't get there at 1.2 as you all know we're already seeing the devastating impacts of the storms and the hurricanes but what most people don't know about are the droughts and the sargassum seaweed and the destruction of the coral reefs that lead to coastal erosion so at a time when we need to have expenditure more than ever there is usually there is little concessionary funding available there's little fiscal space available and there's an urgent need for us to seriously reform the international financial institutions if we are to be equal to the majority of poor people who don't live by the way in poor countries 75 percent of the poor people of the world little income countries that are denied access to concessionary funding and that do not have the physical space even when they get funded and that have been compounded by events outside of control in the pandemic and indeed of course with the climate crisis that sounds like a to-do list for the imf so much so mia i have a piece of really good news for you you have been championing the allocation of concessional finance not only on income per capita but also on vulnerability to climate shocks and today at the discussions we had the resilience and sustainability trust which will provide long-term maturity finally financing to vulnerable middle countries got a big boost we signed up already 40 billion dollars for it so one uh instrument that that you should take pride of when christine was was the managing director of the imf i remember you saying to us there has to be a location of concessional finance linked to vulnerability it has happened uh but let me take two more points of of mia's list if i if i may the first one is the issue of debt in 2020 debt levels have jumped for a understandable reason to put the floor under the economy largest increase since the second world war in one year in 21 it was easy because interest rates were low access to financing abundant for some it was cheaper to pay for more debt in 21 because of this drop in in interest rates 22 different in 22 we have to praise for quite a number of low-income countries some middle-income countries to hit the wall and we have to be honest that requires upfront action by the countries themselves do all you can extend maturities if you have currency mismatches fix it but also for us and the imf has its own responsibility we have to help countries restructure that early and if we don't down the road this year we may be in a very difficult place you talked about the 50 basic points just imagine what it means for emerging economies if on top of it their currency depreciates which is also possible and capital starts seeking the comfort of coming here to the united states very important problem and the in the other one i want to touch very briefly on is a climate change um it is not going away on the contrary it is getting worse for shock-prone countries this requires for them to take measures to make their economies less vulnerable to these shocks for the rest of the world to provide them with the support that is necessary sri muliani co-chairs the group of finance ministers that are wrestling with this issue we have to come up with practical very effective schemes because if we don't it would be for these countries for these vulnerable countries it would be a shock they cannot anymore sustain on their own since we're on the policy discussion i do want to dive a little bit into monetary policy since we have the the world's two leading central bankers at this table and and maybe i'll ask umd who has a tougher job right now this guy or uh president lugard whoa well they both are fully equipped to do their jobs and as a result it is easy for both of them yeah i think we can agree with that personal lagarde so clear europe is dealing with sky-high inflation rates as well highest we've seen in the in the eurozone why are you not sounding as hawkish as chair powell when it comes to raising interest rates and tackling inflation well first of all i'm not a hawk i'm not a dove and i'm carrying this little owl with me all the time to remind myself that everything that we eventually decide has to be a concerted coordinated collective decision but i think you ask a really important question and i thank you for that because it's often the case that commentators analysts will just put the two of us in the same bag and i'm very proud to be associated with with jay powell because i respect him greatly but our economies are moving at a different pace our inflation are fed by different components and as a result of that our analysis of the roots and the consequences of inflation have to be different let me just give you um an example and i'll just speak for europe and then i'll let my colleague mr powell speak for his economy given that we have both the objective of price stability which is the driving uh compass for us our inflation numbers are very high you're right you know 7.4 percent in march and we will be you know more than double above the target at the end of the year but when you try to understand what comprises that very high number you see that almost 50 percent of it is energy prices so that's a supply shock that we are taking um if i look at my core inflation so if you take out food you take out energy i'm down to three percent it is north of my target which is two but it is more manageable if i may um it's actually 2.9 because it's just been revised this morning so our inflation is fueled by a supply shock which calls for a particular type of response which brings together fiscal policies and monetary policy and obviously you know we cannot operate at the same pace with the same sequence using the same instrument necessarily when it's that kind of inflation that we are dealing with so it is much broader based than it was it is much higher than our target but it is supply driven number one and it needs to be addressed in a sequential flexible gradual way which is what we are we have begun doing we have started the journey back in december we have reinforced that position in march and we will have a new set of fresh data in june which is when we have our next monetary policy governing council at which point we will have to determine when we stop net asset purchases in the course of the third quarter of course but when in the third quarter is it going to be early is it going to be later to be determined by the data that we receive and that will then lead us to assess whether or not an interest hike is needed and at one point at what point in time uh after the net asset purchases have concluded so you don't have that in your mind that you'll be raising interest rates say in july i have all the steps all the tools and all the sequences in my mind all the time and what i look at all the time too is the various indicators that are provided by the forecasters by market analyst by markets by consumers by the labor market which informs us because clearly the second round inflation is is one component that for us is critically important in order to determine whether inflation expectations are well re-anchored at around two percent or whether they're at risk of de-anchoring so that's what i have on my mind all the time but they're moving up a little bit to be fixated on a day a time in the day doesn't make any sense to me because once we say that we are data dependent for goodness sake let's wait until we have the data and then we move on to decide and we've agreed on a sequence we have to follow that sequence in the journey that we have embarked upon what about inflation in the u.s some are wondering if it's peaked do you think so so let me say one of the great benefits of the imf meetings is the chance to talk and collaborate christine and me and all of our colleagues talk about these things and we find a couple things first is that inflation is really a global problem it's it's quite everywhere and it's high in most places but there there are differences there are certainly differences so in the united states we have very strong growth and we have higher inflation we have higher core inflation than than europe does for example we also came into this europe has struggled more than we have with with low inflation well below target had a much lower policy rate so we have a different level of underlying inflation so they're just differences and of course we all serve domestic mandates so in the case of the united states you know we have had an expectation that that inflation would peak around this time and would come down over the course of the rest of the year to an extent and then come down further in 2023 these expectations have been disappointed in the past and so now we're really in wanting to see actual progress there's a it may be that the actual peak was in march but we don't know that and so we're not going to count on it and we're also no longer going to count on um help from supply side healing we're going to we're going to if we get that that'll be great and i think that would be enormously helpful in in having us a soft landing but but we're really going to be raising rates and getting expeditiously to levels that are more neutral and then that are actually tight tightening policy if that turns out to be appropriate once we get there but isn't it going to be hard to control inflation through tightening when a lot of it is coming from the fact that russia and ukraine are major exporters of so many commodities that we need we don't know how long this war is going to go on we don't know how long china is going to be seeing these rolling shutdowns and therefore more supply crunch isn't going to be harder than normal to get a handle on inflation through your policies yeah we of course can't affect supply side issues we really can't affect much food and energy prices either in the near term so it comes down to what we what we can do is our tools work on demand but we have a we have a job to do on demand and i i'll go point to the labor market there are you know substantially more uh job openings than there are people who are unemployed and if you if you take total employed people plus job openings that's demand for labor if you look at the size of the labor force there are more than 5 million more demand than there is supply so we've got a demand supply imbalance in the labor market and elsewhere in the economy it's it's clear and that comes from a number of things including fiscal policy including what we did in at the height of the crisis so there is a demand job to do but you're right we we can't fix supply side problems do you need the stock market to be lower demand you know we wouldn't i never would point to one particular price or asset or class of assets but generally the way our policy works is we we control one overnight rate plus the balance sheet also has some effects but and that affects broader financial conditions and that includes asset prices include credit availability risk spreads all all kinds of financial conditions and the financial conditions in the end those are what affect the real economy so we monitor financial conditions so there really are two steps there and you know you're it one of the many there are many different uh combinations that are possible of of financial conditions and we have seen some tightening from our you know from our rate increases and that's to be expected so some people have this idea president lagarde that that that you guys need to shock the markets to really just to start to see more of an impact when it comes to putting pressure on demand and on inflation is that something you ascribe to i think what we need to do is communicate with as much clarity as possible as to uh what what we analyze what we see what timing we have in mind and and what what journey are we embarking on and you know for us it's not so much an issue an issue of tightening when we look at the real rate it's an issue of normalizing monetary policy uh and and using the tools that we have i think the added dimension that europe has is that it's a monetary union with the complexity of a monetary union where you have 19 different uh fiscal policies 19 different uh treasuries and and that makes my job just a little bit more complicated but you also have the euro which because you're moving at a slower pace is weakening pretty substantially is it getting too weak and making the inflation problem worse we don't target any any particular exchange rate we pay attention to it it clearly has an impact on inflation but we don't we don't target uh any exchange rate minister miliani want to move it to the the fiscal side of things we've gotten we've done monetary policy as you look at the appropriate policies right now you know it's a little tricky because normally the imf would advocate for fiscal stimulus in a weakening global economy can't do that now when we have such a such a strong inflationary environment so how are you thinking of the sort of policies to insulate your economy from some of these issues well first we are not starting from uh the situation which is favorable after two years of the epidemic which is widening the deficit and debt for all country in the world that's one thing second with the interest rate inflation and the interest rate respond the cost of borrowing definitely is going to be high so if you are going to continue boosting this is the supply demand side in this case if you look at the recovery in indonesia is demand has been now growing very fast consumption recover with the mobility because of the economy under control investment recovery export is double-digit growth so we don't have this the recovery from the demand side if it is going to be a problem whether this can create overheating but our inflation is now around 2 so it's much much lower in this case the problem on the supply side is much more complicated as uh chairman powell mentioned if it is related to the energy and food it's politically socially very sensitive you cannot delay on that side and that's why usually that immediately create a fiscal pressure in the form of are you going to allow this shock coming from outside pass through directly to the people or you are going to absorb the shock through your fiscal policy by providing subsidy and then your deficit will be widened that deficit is going to be too costly because the interest rate now is much higher so this is really not not a freelance or free policy you really have to be very careful in designing all aspects of the fiscal side i think for from the minister of fine point of view you should not uh just like christine mentioned you should not narrow your instrument you have a lot of options in the fiscal side you have on revenue side so on tax non-tax revenue excise you really have to look at the composition of your revenue which one is actually strong enough to then you can collect more and that's why in indonesia even during panama we reform the tax taxation we pass through legislation reharmonizing the whole legislation related to the tax including anticipating to this global taxation agreement in which we are going to have at least a better arrangement on the taxation across country the second one you look at the spending side and this is exactly our spending in the past two years dominated mainly by the coffee related spending health vaccine treatment therapeutic so now when the declining rate of the coffee meaning that you have a fiscal space you don't want to squeeze so that the economy is going to weak again so the same space but you free up from this health you can use it for others for example infrastructure again labor intensive infrastructure so that you can create job because many of them is actually unemployed or reduce their income during the fundament that can be done so expenditure site definitely have a room for that for you to really do in a much more detailed way what that can create job better what that can shield the shock for example like food security energy security infrastructure that can improve your productivity so that is very important then you are dealing with the financing strategy with this higher borrowing cost you have to be very careful so fiscal consolidation is definitely very important in indonesia we are reducing our deficit from 6.1 percent to 4.5 we are aiming for 4 and then below 3 that is the fiscal discipline of the indonesia fiscal policy in the past 20 years so we only have three years during the span me to allow to have the fiscal deficit above three percent that's signaling to the market that we are on our track credible enough so that the market is going to price our bond correctly in this case so they are not creating excessive punishment only because uh chairman powell said that i'm going to do the 50 basis point how many times that is going to be something then what did he [Music] because you're asking the question basically prime minister motley you know you brought up food insecurity and you're very powerful i went back last night and watched it again inspiring speech at the u.n last fall i believe i that that was before any of this got so extreme because of the war in russia so so i'm curious how you're thinking about it now and and what sort of solutions we can look at well the truth is that all of us have had to go into situation where we put measures in place boost food security food and nutritional security in the caribbean community we've set a target which was there before all of this of reducing imports by 25 by 2025 and we have an agricultural investment conference coming up in guyana which is the lead country on food security for us in the caribbean community but i hate the point because i heard my colleague minister just now referring to what has to be done in order to protect our people against these pressures the reality is that with a high debt um framework as most of our developing countries have a small island developing states not because of profligacy not because of corruption but largely because of having to take on our balance sheets the the consequences of the actions of others we feel that the time has now come for us to make some decisions to change it and crystallina you're absolutely correct about the resilience and sustainability trust and we thank you for it and in fact it's a right step in the right direction it's the only step left back that acknowledges vulnerability but we need the world bank and the development banks to go further with us and the reality of the things you said to us at the beginning of the pandemic was that you needed us to keep to to spend the money but keep the receipts and we did in fact keep the receipts so it should be easy to identify over specific debt it should even be easy to identify climate related debt but what we need to do because of our high condition already is to put birth on another international balance sheet you can perhaps have a pandemic trust and you can have a climate adaptation trust but the reality is that what we need is to be able to move it off of our balance sheet because if it is on our balance sheet then it precludes us from being able to achieve the sdgs which is our normal development trajectory and we really want you to perhaps treat it like the british ward that um if it has to come on our balance sheet because if it's coming on our balance sheet how do you have a situation where the british understood after world war one they issued bonds in 1914 and 1917 as 30-year debt at five percent consolidated them in 1932 to 3.5 percent with no maturity and it became perpetual debt that they paid off a hundred years after the 1914 death now we have to think outside of the box because it's becoming increasingly difficult even for us to shield our populations with the limited fiscal space that we have against the fact that the cost of debt is likely to increase because of of the um monetary conditions tightening and because of the fact that we just simply are not seeing the rate of economic recovery as quickly as we need to now we're confident that tourism recovery usually can come back and bounce back quicker than most but what is happening with the increased fuel costs will affect the cost of flights will affect also how people view where they want to go and you have to ask yourself and and christine you're perhaps better in a position to say this is there still a strong appetite for travel in europe given what is happening with the war in ukraine and um i i i just hope that we can take the bold and brave decisions necessary because too many people's lives are at stake and quite frankly it cannot be a unidimensional conversation either about what is happening in ukraine alone we are totally sympathetic but what's happening to the people in tigre what's happening to the people in yemen what's happening to the people elsewhere that are also on the verge of a humanitarian place if not in the midst of that crisis already there's a lot there honey any a few questions i think i think mia is totally right and i think that we should acknowledge that all wars are horrible our human tragedy are causing devastation and and economic harm all wars uh but and this one is is is no different and it is it is self-inflicted by by russia in a determined and totally unjustifiable way but all wars are are to be uh are to be stopped you're completely right and consequences of war when you look at afghanistan for instance that's another place where clearly the consequences of of wars and years of wars are are are hurting people and hurting women more than anything else actually md did you want to respond to that question when the imf was created the main objective was to help countries correct domestic policies that are undermining their opportunities to grow and create employment today what mia is saying is we live in a world in which they are exogenous shocks that are harming countries and are putting them in a position in which on their own they simply cannot handle it and the question in front of us is how do we recognize that it is not bad governors it is not bad policies it is a climate shock a pandemic a war that is dramatically impacting a country and what is the role of international institutions to be a corrective force in that regard during our meetings this time this issue of what is the role of the imf in a world of multiple shocks some of which are because of the evil of men some of which are because of mother nature but their devastating countries to a point in which they simply cannot pull themselves out this is one issue and mia is right we have to work on identifying instruments we are looking into are that for climate swaps a possibility we haven't advanced it enough it is still in the universe of retail in other words i would do it for you for your project we want to move it to performance indicators and the world of wholesale in other words we do programs with a country like barbados the second issue though is that not all problems are exogenous we still have plenty of problems that come because of poor judgment bad governance corruption when christine was the managing director here in 2018 early 2019 in these good days that we almost forgot existed she would say when the sun is shining fix the roof what we are now discovering is that many countries did not fix the roof when the sun is shining now it is pouring well maybe now we get to fixing the roof i would strongly argue that there are many countries where structural reforms reforms related to transparency improvements in governance can significantly improve image attractiveness for private investments and performance indonesia has done systematic reforms that took indonesia now to be in the small universe of countries emerging market countries that have caught up with their pre-pandemic level and i think for for us we should not shy away from the issue of good policies mean better lives of people you mentioned the role of the imf you know there is this bigger question right now about the role of globalization in general and and the onshoring of manufacturing and supply chain and it started with covet or maybe even before that and really got exacerbated by this war in ukraine and obviously chair powell there are going to be ramifications of this for growth and for inflation if we are in fact in a world where globalization is going in reverse or even dying what do you think well that is certainly a possible outcome here i think you've seen uh questions about globalization and this this series of events around ukraine certainly has the the possibility of leading to a more fragmented political situation and economic situation uh you saw secretary ellen's speech this week about uh about looking to i think she called it friendsharing so i think there's a lot of thinking going on like that you know the globalization that we had uh had benefits to it and it had cost cost involved in it um and you know these are really questions more for elected governments i would say than they are for the for a central bank but there would certainly be a different world it might be a world of perhaps higher inflation perhaps lower productivity but more resilient more robust supply chains if we were to have uh i mean the supply chains that we had were very efficient but quite fragile it turned out so and and i think it's it's not clear that we're that we're seeing a reversal of of globalization it it is clear i think that it's certainly slowed down and it may go into reverse i don't know is that i mean clearly europe's thinking about it in terms of security and things like energy and dependence on that sort of thing do you think we're going in reverse no i think we're going to revisit uh the terms of trade and who we are trading with and on what principles we are determined to continue trading and and reorganizing supply chains and you know for once i'm quite happy to actually um plead for the case of europe because there's there's always europe bashing now and again and i think that the work that we had to do over the last 70 years and the adjustment that we had to make moving from a small group of six to now 27 countries which are all members of this you know single market where goods capital and people move freely has been a laboratory of um a different kind of trade and it is not easy let's face it there are countries sometimes that are drifting that would like to operate slightly differently but where the governance the rule of law the principles by which we abide when we join the club keep us together and keep up on on on track with those key principles that we respect so it is a bit of a laboratory and i would hope that as we as we re-examine and revisit globalization which has provided a lot of good in and of itself we can use that experience to see how we can enforce how we can govern how we can make sure that everybody is included that you know we don't leave some by the side of the road but we try to be together and make sure that it is inclusive i know it's something you're thinking about a lot i mean yes maybe it's a taboo topic to talk about an imf world bank meeting but but this idea of the fragmentation of what's happening geopolitically and the alliances that are forming and how that's going to drive the underlying free movement of trade and people and capital the we are living in a in a multi polar world and that has already led to some frictions and some shifts in trading part partners but i am in the both of those who say we are so integrated and if you make a list of the problems that no one country can resolve on its own it's a very long list we have to find ways to work together so what is the question are we going to evolve in blocks that are closed and function independently from each other or we would have some preferences and training prefer trading partners but we will have highways and bridges that allow us to still solve big problems come on the same page what was so interesting today in our discussions was how strong the voice of we have to work together was in the room and it was especially emerging markets in developing economies that said hey we have achieved so much because of this integrated global economy it is irresponsible to make the world poorer and actually sri muliani spoke so well that it is the quality of our world not just the quality of our economies that is at stake but it is more difficult and it makes my job even more important in finding place for all of us to agree you probably have heard the story of communicates not materializing didn't materialize for us the imfc but but eve everybody agreed on the substance of the policy conclusions and recommendations everybody everybody and then we had one member that said well but you're saying something else there that i don't agree with it is very very early in my view to go and buy a coffin for globalization not that yet that's that that that's quite a statement minister milani curious about your take and whether you find yourself in the in sort of an awkward position because of the close trade ties with china and proximity there and then obviously the relationship with the u.s and also as the chair of g20 and the developing nations there how you sort of weave all of this together well um all emerging countries developing country or from developing countries to become emerging countries they usually can achieve those level of progress because they are they were open they are also integrated with the global economy so when christine was uh in the imf i think telling about the globalization has reduced a lot of poverty and that's why what we are aiming all the focus for many countries how you are going to prepare the foundation of your economy whether this is on the policy level institutional level as well as the practice of the business that need to be competitive so that you are going to be able to have this efficiency productivity and then improvement on the livelihood of the people now it's changed the language is no longer about efficiency but all on security talking about reliability so even i think we just heard from chairman power that if that is at the cost of efficiency be it maybe now that's really maybe creating a huge impact for many developing country emerging countries who they in this case enjoying this improvement as well as the progress in their economy and prosperity through globalization through trade and investment and this is no longer become the instrument now for indonesia because we are big enough country the biggest in asean economy and of course in terms of the trade partner investment partner united states european japan and china they are all the biggest partners for indonesia of course within the asean we have for example with singapore so the choices is there and we enjoyed this because we know that the world following and implementing the global rule even though it's not perfect if you talk about wtao there is here and there but we know that there is a rule as a baseline in which we will play based on that and that's exactly what holding all of us the the world together now if a country can violating international rule or in this case that we no longer trust this rule can secure our providing safety and security and certainty then the world is actually resetting it's totally different and this is historical in a way because the world enjoying huge progress in terms of prosperity if you look at declining of the poverty rate improvement and human capital index infrastructure development there all because we rely on this goodwill trust and building this rule for all countries in which then we can rely i'm not saying it was proper it is not it is not there is always like but it serves well or at least it serves all the member country in this world to actually rely on those kind of mechanism now i think it's shaky and that is exactly maybe what is the highest risk for any country to design their own policy what does it mean for indonesia should we like self-sufficient in this case for indonesia it could be because we are big we have a lot of land we have fertilized so we do have like the food security energy security we have coal we have oil we have gas but not all countries have this kind of luxury like us and so should we not care about others that is not really i think the the right uh morally not right as well as from the interests of the global economy it is not also right we're we're really we're tight on time we have one minute left but i do want to hear really quickly from everyone including you prime minister motley i i sometimes get the best answers as a journalist when i ask people what i'm not what we're not paying attention to what the media or the world is not focused on so i'll ask you just very quickly either an upside risk or a downside risk as it relates to the global economy what we're not paying close enough attention to and we what you would flag and prime minister motley put you on the spot and and go to you first i'm saying that there's an absence of global coordinated political leadership the g20 is not representative enough and we don't have the political will the problem is not with the people who you have in the studio for the most part it's not the heads of the institutions it's the absence of countries to act in a coordinated way that will relieve the pressure we saw it in the pandemic we're seeing it with the with too many other issues and hopefully we can get the sense of urgency of the moment impressed on all of us globally such that we can avert the worse minister miliani what about you well i think as a holding this presidency of g20 what is remarkable remarkable given this tension whole country that we consulted because g20 is based on the consensus all countries that we consulted they believe and they also want that the cooperation and collaboration and coordination what's uh prime minister maya manson is actually the one that they want this to be preserved regardless differences so amazingly what we are thinking is supposed to be safe and preserved and where the reality that we are now facing is actually quite a big gap so our responsibility holding this presidency is try to continue making making this goodwill of collaboration and cooperation try to save a piece of the world most important asset that is coordination and collaboration will putin be at g20 in bali this year well we invited because uh inviting the head of state cannot be like oh tomorrow we are going to have a g20 and then they just send we invited like back then and it's already now all the country and the g20 received the invitation in terms of the arrangement of the meeting itself just like what we have yesterday it was not easy but at the end they are all in the same room but if you don't agree and you want to express those politically like christine he walk out so that's that's another expression of the policy but it doesn't prevent us to talk about the substance which is important not only serving the g20 but also for the rest of the world so it should be manageable and doable chair powell what are we not paying enough attention to so i'll tell you what i'm thinking about which you know we had this economy that was you know very low inflation uh very low unemployment and everywhere in the world before the pandemic then the pandemic comes in and really knocks everything sideways then we have this remarkable particularly united states response incredibly fast recovery faster than anyone hoped and then we have inflation and so that's a lot right there and then we have a war and now we're realizing that covet is still really with us so what what i'm thinking about is a couple things one is how is this are we going back probably not to the old economy what's the new one going to look like the other thing maybe more pertinent to your question is in the middle of this is a labor market in the united states where people can get paid well it's it's it's too hot you know it's not it's unsustainably hot but not notwithstanding it's a very very good labor market for workers and it's our job to to get into a better place where supply and demand are closer together but i'd say that's uh that's how i respond in the upside category risk you're saying wages are good people can get jobs there's a lot to like about the u.s labor market but i'd be the first to say though that it's it's not sustainably uh hot but i do think with our tools we can get supply and demand better aligned president lagarde what about you what should we be paying more attention to i think of two things one is what i would call the green swan we talk about black swans and and i agree with with jay that we've we've had one thing after the other hitting us and in the main we've tried to respond as as as well as we could and often in a very coordinated fashion thanks to international institutions like the imf but the greens one is something that that terrifies me you know and i think of what's happening in south africa at the moment the hundreds of people that are dying uh because of uh of flood and and you know what's going to come next could it be mother nature that we are hurting so much that it retaliates against us so that that's one thing that is that is often on my mind i think the next one is the madness of men more than women actually always yeah madam empty i i think we are not paying sufficient attention to the law of unintended consequences we take decisions with an objective in mind and really think through what may happen that is not our objective and then we wrestle uh with the with the impact of it take any any any decision that is a massive decision like the decision that we need to spend to support the economy and at that time we did recognize that mainly to too much money in circulation too few goods but didn't really quite think through the consequence in a way that upfront would have informed better what what we do and i subscribe entirely what to what christine said about climate shocks we are already out of time and the fact that whenever something hits us we forget about this other crisis is incredibly troubling the fact that we are i'm sorry i'm going on here but i'll finish in a second we act sometimes like eight years old playing soccer here is the ball we are all at the ball and we don't cover the rest of the field our ability to deal with more than one crisis at one time is very very limited and we have to zero in on the really big things that would determine the future and keep our attention on them when the war started my daughter calls me a week later and says mom what happened with the pandemic it disappeared from media we didn't pay any attention it is still with us so we have unintended consequences of actions and we have insufficient attention to cover the whole field well we've covered a lot today in this discussion so thank you all so much for your time and your candor and taking my questions and thanks to everybody who tuned in as well have a great afternoon thanks for being with us [Music] [Music] thank you very much you

Channel: IMF

Views: 32,151

Keywords: IMF, international monetary fund, #GlobalEcon, Economy, Economics, Barbados, Lagarde, Indonesia, ECB, Fed, Jerome Powell

Id: km2voJBsxU0

Length: 65min 40sec (3940 seconds)

Published: Thu Apr 21 2022