1 00:00:03,200 --> 00:00:05,760 Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the 2 00:00:05,760 --> 00:00:14,800 Speaker 1: global economy to you. If all the international conferences in 3 00:00:14,800 --> 00:00:18,440 Speaker 1: the world get canceled, will global output go up or down? 4 00:00:19,000 --> 00:00:21,799 Speaker 1: I remember putting that question jokingly to a few economists 5 00:00:21,840 --> 00:00:24,759 Speaker 1: in the early stage of the COVID nineteen crisis, back 6 00:00:24,800 --> 00:00:27,440 Speaker 1: when we were just canceling meetings and events, not putting 7 00:00:27,480 --> 00:00:30,480 Speaker 1: all of normal life on hold. The answer we thought 8 00:00:30,560 --> 00:00:33,479 Speaker 1: was it would reduce global output, but deprived of all 9 00:00:33,560 --> 00:00:37,840 Speaker 1: that networking and speechifying, the productivity of the participants would 10 00:00:37,840 --> 00:00:41,000 Speaker 1: surely go up. I thought of that this week because 11 00:00:41,040 --> 00:00:44,120 Speaker 1: one fixed point in the international calendar that hasn't moved 12 00:00:44,479 --> 00:00:46,800 Speaker 1: to the date of the spring meetings of the International 13 00:00:46,840 --> 00:00:49,600 Speaker 1: Monetary Fund and the World Bank. They've all been happening 14 00:00:49,600 --> 00:00:52,360 Speaker 1: this week online, and they might turn out to be 15 00:00:52,360 --> 00:00:55,400 Speaker 1: more important than usual as finance ministers and central bank 16 00:00:55,440 --> 00:00:58,280 Speaker 1: governors think about how best to help the world economy 17 00:00:58,560 --> 00:01:01,160 Speaker 1: come out. The other side was spending most of this 18 00:01:01,240 --> 00:01:03,960 Speaker 1: week's episode talking about that with the I m S 19 00:01:04,080 --> 00:01:07,839 Speaker 1: Chief economist Peter gop Enough, but first, I wanted quickly 20 00:01:07,880 --> 00:01:09,920 Speaker 1: to bring your attention to one other feature of the 21 00:01:09,959 --> 00:01:14,720 Speaker 1: economic landscape that hasn't budged, and that's German policymaker's conviction 22 00:01:15,000 --> 00:01:24,919 Speaker 1: that they are always right. Well. Europe Economy reporter Katherine 23 00:01:24,959 --> 00:01:28,600 Speaker 1: Boseley will tell us more. Sitting in Zurich, Catherine, many 24 00:01:28,680 --> 00:01:31,160 Speaker 1: of us, looking at the way that Germany has responded 25 00:01:31,200 --> 00:01:34,759 Speaker 1: to this crisis might have thought that they had seen 26 00:01:34,800 --> 00:01:38,000 Speaker 1: the light on running budget deficits to support the economy. 27 00:01:38,040 --> 00:01:40,600 Speaker 1: But they don't see it that way, do they. No. 28 00:01:41,240 --> 00:01:43,880 Speaker 1: I think quite the contrary. I think many people in 29 00:01:43,880 --> 00:01:46,520 Speaker 1: the country will see it as a confirmation of their 30 00:01:47,240 --> 00:01:50,880 Speaker 1: their approach of their frugality, where you essentially, to use 31 00:01:50,920 --> 00:01:53,760 Speaker 1: the words of the I M F, repair the roof 32 00:01:53,840 --> 00:01:56,880 Speaker 1: when the sun is shining and then you have reserves 33 00:01:56,960 --> 00:01:59,320 Speaker 1: for a rainy day. In the piece that you wrote 34 00:01:59,320 --> 00:02:01,560 Speaker 1: earlier this week, you talked about this is the black 35 00:02:01,680 --> 00:02:04,440 Speaker 1: zero policy. It's that that every any anyone who wants 36 00:02:04,440 --> 00:02:06,600 Speaker 1: to be a finance minister in Germany basically has to 37 00:02:06,600 --> 00:02:08,639 Speaker 1: sign up to the idea that you really never run 38 00:02:08,639 --> 00:02:13,280 Speaker 1: a deficit unless you absolutely have to. Um but it's uh. 39 00:02:13,440 --> 00:02:18,320 Speaker 1: Many would say that they've gone beyond just mending the roof. 40 00:02:18,360 --> 00:02:21,160 Speaker 1: They've sort of refused to invest in things that they 41 00:02:21,240 --> 00:02:23,520 Speaker 1: maybe should have invested in. So there's certainly that's been 42 00:02:23,520 --> 00:02:26,880 Speaker 1: the criticism for many years from the likes of the 43 00:02:26,880 --> 00:02:29,239 Speaker 1: I m F, that they actually could be spending more, 44 00:02:29,360 --> 00:02:34,399 Speaker 1: particularly on public investment. That is indeed the case the 45 00:02:35,280 --> 00:02:40,600 Speaker 1: Germany has lagged other European countries, other advanced economies in 46 00:02:40,680 --> 00:02:44,760 Speaker 1: public investment. The infrastructure is not what it used to be. 47 00:02:45,080 --> 00:02:51,360 Speaker 1: The train services a catastrophe, Wireless internet reception is very patchy, 48 00:02:51,440 --> 00:02:55,640 Speaker 1: so there are indeed issues which they could have addressed 49 00:02:55,800 --> 00:02:59,760 Speaker 1: and possibly haven't addressed. And there are definitely economists in 50 00:03:00,360 --> 00:03:05,840 Speaker 1: Germany who say that this, this penny penny pinching approach 51 00:03:06,240 --> 00:03:09,960 Speaker 1: has essentially thwarted the economy in the long term by 52 00:03:10,440 --> 00:03:16,679 Speaker 1: giving it enough enough infrastructure to actually support economic activity, 53 00:03:17,200 --> 00:03:19,040 Speaker 1: and it is I was very struck just looking at 54 00:03:19,040 --> 00:03:21,600 Speaker 1: the numbers a while ago that the public investment is 55 00:03:21,639 --> 00:03:23,760 Speaker 1: a share of GDPs even less than the US, and 56 00:03:23,880 --> 00:03:26,359 Speaker 1: we think of the US as being a great, huge, 57 00:03:26,600 --> 00:03:30,000 Speaker 1: the most greatest example of a place that doesn't invest 58 00:03:30,200 --> 00:03:33,119 Speaker 1: enough in its roads and other things. I guess the 59 00:03:33,160 --> 00:03:36,560 Speaker 1: German response would be, and has been in fact in 60 00:03:36,600 --> 00:03:39,520 Speaker 1: the last week or so, that the fact that they 61 00:03:39,520 --> 00:03:42,800 Speaker 1: were so frugal in the past has now given them 62 00:03:42,800 --> 00:03:45,920 Speaker 1: the capacity to really open the floodgates when it comes 63 00:03:45,920 --> 00:03:49,360 Speaker 1: to supporting the economy now, and we worry that countries 64 00:03:49,400 --> 00:03:53,400 Speaker 1: like Italy for example, maybe don't have that same capacity. 65 00:03:54,080 --> 00:03:58,360 Speaker 1: That is exactly right. The Germany Germans have unveiled some 66 00:03:58,440 --> 00:04:02,880 Speaker 1: of the biggest fiscals simulus programs of any advanced economy, 67 00:04:02,960 --> 00:04:06,200 Speaker 1: and then of course there is also the additional Pan 68 00:04:06,280 --> 00:04:11,560 Speaker 1: European package announced in Brussels last week. Italy obviously has 69 00:04:11,680 --> 00:04:15,280 Speaker 1: less firepower because it's public finances are in a more 70 00:04:15,360 --> 00:04:19,880 Speaker 1: precurious place, which is exactly why, of course there are 71 00:04:19,920 --> 00:04:28,000 Speaker 1: now calls for um jointly issued debt to help rebuild economies. 72 00:04:28,440 --> 00:04:30,000 Speaker 1: I mean, if we step back, I guess if you 73 00:04:30,000 --> 00:04:32,799 Speaker 1: think about six months or nine months ago, where Mario 74 00:04:32,920 --> 00:04:36,200 Speaker 1: drug left the European Central Bank, one of his final 75 00:04:36,279 --> 00:04:40,800 Speaker 1: salvos was to have again a call for looser fiscal 76 00:04:40,920 --> 00:04:44,599 Speaker 1: policy in the Eurozone, particularly the likes of Germany, who 77 00:04:44,680 --> 00:04:48,720 Speaker 1: had strong public finances. You know, one way or another, 78 00:04:49,000 --> 00:04:52,279 Speaker 1: we have got that, and indeed at active fiscal policy 79 00:04:52,320 --> 00:04:56,960 Speaker 1: in Europe is helping to supplement what the European Central 80 00:04:56,960 --> 00:05:00,320 Speaker 1: Bank can do. So I guess we have sort ended 81 00:05:00,360 --> 00:05:02,039 Speaker 1: up in the right place. Even if we were that 82 00:05:02,160 --> 00:05:06,680 Speaker 1: maybe Germans are going to be drawing different lessons from 83 00:05:06,680 --> 00:05:09,719 Speaker 1: it than maybe others might do. That is exactly right 84 00:05:10,279 --> 00:05:13,640 Speaker 1: in the sense that there there you know, work halls 85 00:05:13,720 --> 00:05:17,120 Speaker 1: to spend there. Obviously there is a big analysis and 86 00:05:17,360 --> 00:05:21,560 Speaker 1: in terms of the fiscal spillovers, exactly how big they 87 00:05:21,560 --> 00:05:25,840 Speaker 1: would be from German investment into other countries is a 88 00:05:25,880 --> 00:05:30,039 Speaker 1: matter of the late among economists. But we definitely do 89 00:05:30,240 --> 00:05:35,760 Speaker 1: have the the big, big spending now and there are 90 00:05:35,760 --> 00:05:39,400 Speaker 1: indeed calls in Germany for more spending down the road 91 00:05:39,440 --> 00:05:43,880 Speaker 1: as part of this new green deal that you know 92 00:05:44,000 --> 00:05:47,440 Speaker 1: that has been proposed by the EU. Well, it's going 93 00:05:47,480 --> 00:05:49,400 Speaker 1: to be interesting. I just I can't help thinking there 94 00:05:49,400 --> 00:05:52,360 Speaker 1: are so many things that will get changed by this crisis, 95 00:05:52,480 --> 00:05:54,840 Speaker 1: but I can't help thinking we will have this. We're 96 00:05:54,880 --> 00:05:57,719 Speaker 1: having all the same conversations about Germany needing to have 97 00:05:57,800 --> 00:06:01,400 Speaker 1: LUCI policy for many is to come, despite what we've 98 00:06:01,440 --> 00:06:11,320 Speaker 1: seen in the last few weeks. Catherine Bosby, thanks very much. Well. 99 00:06:11,320 --> 00:06:15,159 Speaker 1: I'm delighted to be joined now by Geter Goppenough, the 100 00:06:15,200 --> 00:06:19,800 Speaker 1: chief economist of the International Monetary Fund, sitting in Washington, 101 00:06:20,040 --> 00:06:23,839 Speaker 1: D C. Geter, You've just produced the Funds new forecast 102 00:06:23,880 --> 00:06:26,440 Speaker 1: for the global economy this week. Obviously it's a big 103 00:06:26,520 --> 00:06:28,560 Speaker 1: change from the last time when you went through that 104 00:06:28,640 --> 00:06:31,680 Speaker 1: process at the beginning of the year. What I found 105 00:06:31,680 --> 00:06:34,960 Speaker 1: particularly striking looking at these forecasts was that your baseline 106 00:06:35,000 --> 00:06:38,479 Speaker 1: scenario for the world was also the most optimistic one, 107 00:06:38,640 --> 00:06:41,360 Speaker 1: when often with forecasts you have a baseline and then 108 00:06:41,360 --> 00:06:43,640 Speaker 1: you have how things have might go well or things 109 00:06:43,720 --> 00:06:46,839 Speaker 1: might go badly. But right now you're really only looking 110 00:06:46,960 --> 00:06:50,520 Speaker 1: at how things could go badly. Stephanie, I think what 111 00:06:50,680 --> 00:06:53,120 Speaker 1: you can say is that you should be struck by 112 00:06:53,160 --> 00:06:57,520 Speaker 1: the uncertainty around the forecast more than anything else. We 113 00:06:57,560 --> 00:07:00,480 Speaker 1: started constructing this over the last level weeks and as 114 00:07:00,520 --> 00:07:02,839 Speaker 1: you know are the I m F it's get gets 115 00:07:02,839 --> 00:07:07,120 Speaker 1: built both bottom up and then top down. So this 116 00:07:07,240 --> 00:07:09,400 Speaker 1: is a very elaborate process with a hundred and eighty 117 00:07:09,440 --> 00:07:12,640 Speaker 1: nine member countries. So this estimate reflects that. So another 118 00:07:12,720 --> 00:07:16,120 Speaker 1: question is you know what kinds of scenarios should we 119 00:07:16,120 --> 00:07:18,920 Speaker 1: be constructing. And yes, there are some upside risks and 120 00:07:18,960 --> 00:07:21,440 Speaker 1: we could see that coming about, especially if we have 121 00:07:21,880 --> 00:07:25,880 Speaker 1: good positive news and therapies and vaccines, But right now, 122 00:07:25,920 --> 00:07:28,120 Speaker 1: we do think that most of the risks of the downside, 123 00:07:28,160 --> 00:07:31,880 Speaker 1: and so we elaborate on three scenarios where things can 124 00:07:31,920 --> 00:07:35,240 Speaker 1: get much voice. And some of those alternative scenarios for 125 00:07:35,280 --> 00:07:38,920 Speaker 1: the global economy involve the return of the virus in 126 00:07:39,000 --> 00:07:42,640 Speaker 1: countries after lockdown measures potentially have been lifted or or 127 00:07:42,720 --> 00:07:46,120 Speaker 1: partially lifted in countries maybe maybe later in the year. 128 00:07:46,680 --> 00:07:49,200 Speaker 1: Is that something I wonder that you thought more and 129 00:07:49,280 --> 00:07:53,400 Speaker 1: more about as you've been finalizing these forecasts. So we 130 00:07:53,480 --> 00:07:57,760 Speaker 1: are you know, our baseline assumes that the pandemic and 131 00:07:57,800 --> 00:08:00,360 Speaker 1: the containment measures will peak in the second whatever for 132 00:08:00,400 --> 00:08:02,720 Speaker 1: most countries in the world and then come off gradually 133 00:08:02,720 --> 00:08:06,120 Speaker 1: in the second half, but clearly that's not given and 134 00:08:06,160 --> 00:08:09,440 Speaker 1: talking to epidemiologists and public health officials, there's certainly no 135 00:08:09,520 --> 00:08:12,080 Speaker 1: certainty that will happen. Now, there are some countries where 136 00:08:12,080 --> 00:08:15,440 Speaker 1: you are seeing containment measures working, and there is you know, 137 00:08:15,560 --> 00:08:17,600 Speaker 1: flattening of the curve and the number of new cases 138 00:08:17,600 --> 00:08:19,760 Speaker 1: are coming down, but it's still too early to say, 139 00:08:19,760 --> 00:08:22,360 Speaker 1: which is why we look into these other scenarios where 140 00:08:23,080 --> 00:08:25,960 Speaker 1: the containment measures need to go into the second half 141 00:08:26,000 --> 00:08:30,360 Speaker 1: of this year and even into and if that happens, 142 00:08:30,760 --> 00:08:33,679 Speaker 1: then it will be uh, you know, doubling of the 143 00:08:33,960 --> 00:08:37,160 Speaker 1: of the downturn, which is from three percent a negative 144 00:08:37,160 --> 00:08:42,120 Speaker 1: three percent to negative six percent in twenty and almost 145 00:08:42,120 --> 00:08:45,040 Speaker 1: no recovery than in one. So it would be much 146 00:08:45,240 --> 00:08:48,160 Speaker 1: much worse. And what we're looking at is of course 147 00:08:48,240 --> 00:08:50,959 Speaker 1: already extremely bad. I mean, this new forecast shows a 148 00:08:51,040 --> 00:08:54,720 Speaker 1: declining global output greater than any in our lifetimes, and 149 00:08:54,720 --> 00:08:59,120 Speaker 1: certainly greater than the global financial crisis. We should remember that, 150 00:08:59,120 --> 00:09:01,680 Speaker 1: I guess this week is when you would usually have 151 00:09:01,760 --> 00:09:04,600 Speaker 1: finance ministers and central bank governors around the world gathered 152 00:09:04,600 --> 00:09:06,520 Speaker 1: in Washington for the I m F and the World 153 00:09:06,559 --> 00:09:09,000 Speaker 1: Bank Spring meetings. In fact, you and I were supposed 154 00:09:09,000 --> 00:09:10,920 Speaker 1: to be doing this interview in person at the Bloomberg 155 00:09:11,000 --> 00:09:14,880 Speaker 1: Bureau there, but the meetings are happening virtually and I 156 00:09:14,920 --> 00:09:17,520 Speaker 1: was struck. One of our reporters, Rich Miller, wrote this 157 00:09:17,559 --> 00:09:21,640 Speaker 1: week the world's ability to check the coronavirus contagion and 158 00:09:21,679 --> 00:09:24,640 Speaker 1: fully recover from the worst recession since the Great Depression 159 00:09:25,040 --> 00:09:29,240 Speaker 1: might depend on what international economic policymakers decide this week. 160 00:09:29,840 --> 00:09:33,000 Speaker 1: Do you agree that there's that much resting on the 161 00:09:33,040 --> 00:09:38,400 Speaker 1: meetings happening this week and those conversations. I think it 162 00:09:38,400 --> 00:09:42,079 Speaker 1: it really makes a big difference of the international community 163 00:09:42,200 --> 00:09:46,200 Speaker 1: steps up and and does even more than what they've 164 00:09:46,240 --> 00:09:50,400 Speaker 1: been doing. Now. You know, there are many advanced economies 165 00:09:50,440 --> 00:09:53,040 Speaker 1: of the world that have put in a lot of 166 00:09:53,080 --> 00:09:56,480 Speaker 1: stimulus or fiscal and monetary policy. So we the global 167 00:09:56,520 --> 00:09:59,560 Speaker 1: economy as a whole, we have about eight trillion dollars 168 00:09:59,600 --> 00:10:03,640 Speaker 1: of goal stimulus, discretionary physical stimulus in the system, but 169 00:10:04,000 --> 00:10:08,479 Speaker 1: it's almost all coming from richer countries and advanced economies. 170 00:10:09,320 --> 00:10:13,280 Speaker 1: If you look at emerging markets, developing economies, low income countries, 171 00:10:13,520 --> 00:10:17,080 Speaker 1: they're in a really much more difficult situation. I mean, 172 00:10:17,120 --> 00:10:19,120 Speaker 1: if there's a health crisis, which they have to deal 173 00:10:19,240 --> 00:10:23,040 Speaker 1: with UH, you know, with worse health systems, and then 174 00:10:23,040 --> 00:10:25,240 Speaker 1: on the on top of that is the financial crisis 175 00:10:25,360 --> 00:10:28,719 Speaker 1: with rapid capital outflows, if your commodity explot as a 176 00:10:28,720 --> 00:10:31,880 Speaker 1: commodity price collapse and you have high levels of debt. 177 00:10:31,920 --> 00:10:34,960 Speaker 1: So their abilities to do the kind of spending that's 178 00:10:35,080 --> 00:10:38,400 Speaker 1: needed at this point, given the high dead burdens that 179 00:10:38,440 --> 00:10:41,400 Speaker 1: they have UH is a major issue. And I think 180 00:10:41,679 --> 00:10:44,960 Speaker 1: the meetings this time around, how you know, would be 181 00:10:45,000 --> 00:10:49,000 Speaker 1: addressing those would would be addressing that particular concern and 182 00:10:49,040 --> 00:10:52,280 Speaker 1: how countries and how the international community can step up 183 00:10:52,320 --> 00:10:57,559 Speaker 1: to provide consertual financing, death relief and aid. There is 184 00:10:57,600 --> 00:10:59,520 Speaker 1: already what we would normally consider to be a pretty 185 00:10:59,559 --> 00:11:03,280 Speaker 1: large hot for you to tap into to help countries 186 00:11:03,360 --> 00:11:06,479 Speaker 1: through this. But when we look at what advanced economies 187 00:11:06,480 --> 00:11:08,880 Speaker 1: have done, I mean, their governments are having to take 188 00:11:09,120 --> 00:11:13,400 Speaker 1: much bigger steps, much faster than they might previously had 189 00:11:13,440 --> 00:11:15,960 Speaker 1: to consider, are you going to need even more to 190 00:11:16,040 --> 00:11:18,840 Speaker 1: give emerging economies and developing countries the help they need? 191 00:11:18,960 --> 00:11:21,120 Speaker 1: They so, how are you going to get it? So 192 00:11:21,240 --> 00:11:25,400 Speaker 1: with you know, advanced economies, they have put a lot 193 00:11:25,640 --> 00:11:28,959 Speaker 1: in the system. I think one of these things about 194 00:11:28,960 --> 00:11:33,760 Speaker 1: this crisis is because of so much of uncertainty, you know, 195 00:11:34,040 --> 00:11:37,160 Speaker 1: you have to have the ability to speedly recalibrate what 196 00:11:37,280 --> 00:11:39,480 Speaker 1: you're what you're going to spend, and what even the 197 00:11:39,520 --> 00:11:42,560 Speaker 1: design of the policies. So again I think you know, 198 00:11:42,800 --> 00:11:44,559 Speaker 1: to tell you what a number for them would be 199 00:11:44,600 --> 00:11:48,760 Speaker 1: difficult at this point. But the plus side is that 200 00:11:48,840 --> 00:11:52,120 Speaker 1: you see monetary policy and physical policy now working together 201 00:11:52,200 --> 00:11:55,839 Speaker 1: in many countries. In the US, you have you know, 202 00:11:55,920 --> 00:11:59,400 Speaker 1: monetary policy that's providing support that's being back stopped by 203 00:11:59,720 --> 00:12:01,880 Speaker 1: the Treasury, and you see that in other parts of 204 00:12:01,880 --> 00:12:04,959 Speaker 1: the world too, So this kind of coordination is absolutely helpful. 205 00:12:05,600 --> 00:12:08,560 Speaker 1: I mean, interest rates are still very low in many 206 00:12:08,559 --> 00:12:11,199 Speaker 1: parts of the world now. I think for other countries, 207 00:12:12,000 --> 00:12:16,439 Speaker 1: we've estimated that if you're looking at emerging marketing developing economies, 208 00:12:16,640 --> 00:12:19,880 Speaker 1: they would need about two and half trillion dollars to 209 00:12:20,000 --> 00:12:23,800 Speaker 1: deal with their bounds of payments needs. And that's not 210 00:12:23,960 --> 00:12:26,719 Speaker 1: something that they can entirely meet on their own. They 211 00:12:26,720 --> 00:12:29,480 Speaker 1: have a significant amount of reserves and those would help, 212 00:12:29,720 --> 00:12:32,360 Speaker 1: but they will need its support from the international community 213 00:12:32,480 --> 00:12:36,600 Speaker 1: here well, often you make new policy in moments of crisis. 214 00:12:36,640 --> 00:12:38,240 Speaker 1: I was at the U. S. Treasury during the Asia 215 00:12:38,240 --> 00:12:40,960 Speaker 1: financial crisis in the late nineties and there were some 216 00:12:41,000 --> 00:12:44,200 Speaker 1: new facilities that came out of that, for example, a 217 00:12:44,280 --> 00:12:47,760 Speaker 1: new contingent credit line for countries to get support through 218 00:12:47,800 --> 00:12:51,480 Speaker 1: the quidity crisis without the usual stigma of going to 219 00:12:51,520 --> 00:12:54,000 Speaker 1: the I m F. Do you think we'll need that 220 00:12:54,120 --> 00:12:58,600 Speaker 1: kind of innovation or new facility with this crisis or 221 00:12:58,679 --> 00:13:01,120 Speaker 1: is it just about scale up very quickly what you 222 00:13:01,160 --> 00:13:04,200 Speaker 1: and the World Bank already have. I think both of 223 00:13:04,240 --> 00:13:08,080 Speaker 1: it is happening. You need you need Uh, innovation here 224 00:13:08,120 --> 00:13:10,520 Speaker 1: and you need scaling up. You know, you saw that. 225 00:13:11,000 --> 00:13:13,600 Speaker 1: You know, some of the major central banks are extending 226 00:13:13,600 --> 00:13:17,000 Speaker 1: swap lines to other countries to help with the dollar 227 00:13:17,040 --> 00:13:20,960 Speaker 1: liquidity problems at the I m F. You know, we've 228 00:13:21,040 --> 00:13:24,880 Speaker 1: had close to a hundred countries come to us for 229 00:13:24,920 --> 00:13:28,640 Speaker 1: financing needs in the last four weeks. I mean a 230 00:13:28,679 --> 00:13:31,080 Speaker 1: total of about a hundred. So it's a very large 231 00:13:31,160 --> 00:13:33,199 Speaker 1: number coming in a very shortly. I don't think we've 232 00:13:33,240 --> 00:13:35,280 Speaker 1: had a hundred countries come to us before, so this 233 00:13:35,360 --> 00:13:37,920 Speaker 1: is unprecedented. And then of course the speed of it 234 00:13:38,120 --> 00:13:42,600 Speaker 1: is even more unprecedented. Uh. And what we've had to 235 00:13:42,600 --> 00:13:46,320 Speaker 1: do is that to meet their needs, we figured that 236 00:13:46,400 --> 00:13:49,160 Speaker 1: we need to increase their access to access to rapid 237 00:13:49,480 --> 00:13:52,520 Speaker 1: financing facilities right as opposed to the ones for which 238 00:13:52,559 --> 00:13:55,920 Speaker 1: there's a long process of review and long drawn program. 239 00:13:56,000 --> 00:13:58,440 Speaker 1: And so we have done That's one of the major 240 00:13:58,480 --> 00:14:02,440 Speaker 1: stuffs we've taken easy who increase that access to levels 241 00:14:02,440 --> 00:14:04,600 Speaker 1: where we think about now a hundred billion, which we 242 00:14:04,640 --> 00:14:08,360 Speaker 1: think would be enough given the kinds of demands that 243 00:14:08,400 --> 00:14:11,199 Speaker 1: we're seeing. And then the second piece, of course, is 244 00:14:11,280 --> 00:14:14,440 Speaker 1: that we want countries, low income countries to be able 245 00:14:14,640 --> 00:14:18,880 Speaker 1: to do the necessary spending on on health that's needed 246 00:14:18,920 --> 00:14:21,560 Speaker 1: in this crisis, or kind of medical supplies and so one. 247 00:14:22,080 --> 00:14:24,000 Speaker 1: And you know, the last thing we want them is 248 00:14:24,040 --> 00:14:26,960 Speaker 1: that instead of doing that, that they're actually servicing their 249 00:14:27,000 --> 00:14:29,960 Speaker 1: death to the i MP. So we are also in 250 00:14:30,000 --> 00:14:32,920 Speaker 1: the process of providing death service relief to many countries, 251 00:14:32,960 --> 00:14:35,280 Speaker 1: and we just did that for twenty five low income countries. 252 00:14:36,000 --> 00:14:38,800 Speaker 1: Many other facilities have been thought of this on on. 253 00:14:39,040 --> 00:14:43,920 Speaker 1: We're thinking about newer short term liquidity lines for countries. 254 00:14:44,320 --> 00:14:46,640 Speaker 1: That's another piece that would matter, maybe even more for 255 00:14:46,720 --> 00:14:51,120 Speaker 1: emerging markets. So there are the kinds of facilities that 256 00:14:51,360 --> 00:14:52,880 Speaker 1: we are thinking about, and I think it will be 257 00:14:52,960 --> 00:14:55,640 Speaker 1: important more generally for the for the even for other 258 00:14:55,680 --> 00:15:04,040 Speaker 1: creditors and other international institutions to do the same. Now, 259 00:15:04,040 --> 00:15:07,040 Speaker 1: I wonder if we could step back to what you 260 00:15:07,120 --> 00:15:09,640 Speaker 1: might be writing about in your world economic outlook in 261 00:15:09,680 --> 00:15:12,400 Speaker 1: maybe a year or two time. I mean, one of 262 00:15:12,400 --> 00:15:16,280 Speaker 1: the debates that the i m F had highlighted recently 263 00:15:16,720 --> 00:15:19,200 Speaker 1: and we've thought about a lot on this program, is 264 00:15:19,600 --> 00:15:23,480 Speaker 1: whether the exceptional measures taken during and since the global 265 00:15:23,520 --> 00:15:27,560 Speaker 1: financial crisis had left governments with enough ammunition to respond 266 00:15:27,600 --> 00:15:29,680 Speaker 1: to the next crisis. We talked about the lack of 267 00:15:29,720 --> 00:15:33,440 Speaker 1: policy space, but now we're in that next crisis. Of course, 268 00:15:33,480 --> 00:15:34,800 Speaker 1: we didn't know what it was going to look like, 269 00:15:35,040 --> 00:15:38,040 Speaker 1: and governments in advanced economies have been able to do 270 00:15:38,080 --> 00:15:41,360 Speaker 1: a lot with monetary and fiscal policy. So do you 271 00:15:41,400 --> 00:15:43,800 Speaker 1: think we've learned that there was more policy space than 272 00:15:43,840 --> 00:15:47,320 Speaker 1: we thought or is it just that these extraordinary circumstances 273 00:15:47,360 --> 00:15:51,160 Speaker 1: have kind of created space for governments to undertake a 274 00:15:51,320 --> 00:15:54,640 Speaker 1: level of spending we wouldn't have previously thought they could do. 275 00:15:55,760 --> 00:15:58,560 Speaker 1: But it's definitely I think when we were flagging, um, 276 00:15:58,560 --> 00:16:01,440 Speaker 1: you know, not so long oh, was that you know, 277 00:16:01,520 --> 00:16:04,480 Speaker 1: monetary policy cannot be the only game in town, and 278 00:16:05,280 --> 00:16:07,600 Speaker 1: next time something goes wrong, fiscal policy will have to 279 00:16:07,600 --> 00:16:11,600 Speaker 1: play a bigger role. I don't think we predicted that 280 00:16:11,600 --> 00:16:14,560 Speaker 1: that would be even more the case because this time around, 281 00:16:14,560 --> 00:16:17,520 Speaker 1: in terms of targeting the measures and getting it to 282 00:16:17,600 --> 00:16:20,200 Speaker 1: the right people, fiscal policy really has to play a 283 00:16:20,200 --> 00:16:22,800 Speaker 1: big role. And that's what we've seen this time around, 284 00:16:22,800 --> 00:16:25,920 Speaker 1: which is we have seen fiscal policy stepping up in 285 00:16:25,960 --> 00:16:29,480 Speaker 1: many parts of the world. Uh and and working with 286 00:16:29,560 --> 00:16:33,320 Speaker 1: monetary policy to have the biggest impact. So I so I, 287 00:16:33,680 --> 00:16:35,240 Speaker 1: you know, so that is in line with what we 288 00:16:35,280 --> 00:16:37,560 Speaker 1: had expected. I think a second lesson we should probably 289 00:16:37,680 --> 00:16:42,160 Speaker 1: learn is the importance of automatic stabilizers, which is, countries 290 00:16:42,240 --> 00:16:47,360 Speaker 1: that have much you know, better built in automatic stabilizers 291 00:16:47,440 --> 00:16:49,600 Speaker 1: can respond to these crisis much more fastly because the 292 00:16:49,640 --> 00:16:52,200 Speaker 1: speed with which all of this happens. If you don't 293 00:16:52,240 --> 00:16:54,360 Speaker 1: have the infrastructure in places, you don't have the systems 294 00:16:54,360 --> 00:16:58,680 Speaker 1: in place to deliver income support to people, then you 295 00:16:58,720 --> 00:17:01,800 Speaker 1: know you have a harder time getting out of the crazies. 296 00:17:01,960 --> 00:17:04,600 Speaker 1: And so automatic civilizers, I think are another big factor. 297 00:17:05,440 --> 00:17:07,960 Speaker 1: So I guess we should just explain more automatic stabilizers there. 298 00:17:08,000 --> 00:17:10,600 Speaker 1: That's the bit of fiscal policy that works without government's 299 00:17:10,600 --> 00:17:12,640 Speaker 1: having to do anything. So if you if you enter 300 00:17:12,640 --> 00:17:16,160 Speaker 1: a recession, your economy shrinks, your tax revenues automatically go down, 301 00:17:16,200 --> 00:17:19,360 Speaker 1: and your public spending on things like unemployment benefits automatically 302 00:17:19,440 --> 00:17:22,760 Speaker 1: goes up. That's the automatic stabilizers. But all of the 303 00:17:22,760 --> 00:17:26,840 Speaker 1: fiscal policy support, at least in advanced economies, has been 304 00:17:26,840 --> 00:17:30,560 Speaker 1: about trying to prevent their being permanent costs from this 305 00:17:30,720 --> 00:17:35,080 Speaker 1: shutdown in economies, so preventing companies that are otherwise viable 306 00:17:35,160 --> 00:17:39,120 Speaker 1: from going bust and stopping people going into unemployment who 307 00:17:39,240 --> 00:17:41,760 Speaker 1: might otherwise have just been able to stay in work 308 00:17:41,800 --> 00:17:44,439 Speaker 1: and whose jobs are viable. But at this point, do 309 00:17:44,520 --> 00:17:46,960 Speaker 1: you think advanced economies have done as much as they 310 00:17:47,040 --> 00:17:51,120 Speaker 1: can do to minimize that long term damage from this crisis? 311 00:17:51,119 --> 00:17:56,000 Speaker 1: How optimistic are you? I think there is a substantial 312 00:17:56,119 --> 00:17:59,520 Speaker 1: risk in that. You know, this is a crisis that's 313 00:17:59,560 --> 00:18:04,320 Speaker 1: helped and that's affecting small and medium enterprises along with 314 00:18:04,359 --> 00:18:07,040 Speaker 1: some of the big ones. Uh, and getting to them 315 00:18:07,119 --> 00:18:10,560 Speaker 1: is much harder when you have a deep procession of 316 00:18:10,600 --> 00:18:13,800 Speaker 1: this kind. He tends to leave scars, you know, in 317 00:18:13,920 --> 00:18:16,720 Speaker 1: terms of job losses, in terms of firms that go 318 00:18:16,800 --> 00:18:18,760 Speaker 1: out of business and take much longer to come back. 319 00:18:19,359 --> 00:18:23,240 Speaker 1: There are gonna be issues with you know, private sector 320 00:18:23,280 --> 00:18:26,240 Speaker 1: balance sheets, public sector balance sheet. So I think there 321 00:18:26,400 --> 00:18:29,200 Speaker 1: is a lot to be concerned about here. I mean, 322 00:18:29,200 --> 00:18:31,679 Speaker 1: another thing I would like to want to flag is 323 00:18:32,119 --> 00:18:34,400 Speaker 1: that while in the past, when there's been a crisis 324 00:18:34,400 --> 00:18:37,240 Speaker 1: and you have all the stimulus in the system, it 325 00:18:37,400 --> 00:18:39,159 Speaker 1: is a stimulus, which is you want people to go 326 00:18:39,200 --> 00:18:42,800 Speaker 1: out and spend, you want firms to invest now, But 327 00:18:42,960 --> 00:18:45,679 Speaker 1: that's not what the other side of this crisis is, 328 00:18:45,680 --> 00:18:48,520 Speaker 1: which is the health crisis, and so at the same time, 329 00:18:48,560 --> 00:18:50,920 Speaker 1: all of the stimulus is in the system. We want 330 00:18:50,960 --> 00:18:54,119 Speaker 1: people to stay at home and not exactly lot and spend, 331 00:18:54,119 --> 00:18:57,680 Speaker 1: So it's a very different transmission channel this time around. 332 00:18:57,800 --> 00:19:01,720 Speaker 1: The hope is that you will keep people with sufficient 333 00:19:01,760 --> 00:19:05,120 Speaker 1: income so that they can meet their needs, that farms 334 00:19:05,119 --> 00:19:08,359 Speaker 1: and businesses can stay afloat that once we get past 335 00:19:08,440 --> 00:19:13,000 Speaker 1: this period of lockdown, that that things would would recover 336 00:19:13,119 --> 00:19:16,080 Speaker 1: much faster. But I mean, the economic landscape will look 337 00:19:16,200 --> 00:19:18,520 Speaker 1: very different once we come out of this lockdown. And 338 00:19:18,560 --> 00:19:22,040 Speaker 1: I think there's from medicine certainty, I wonder. I mean, 339 00:19:22,080 --> 00:19:24,800 Speaker 1: you're right that this is a different kind of stimulus 340 00:19:24,800 --> 00:19:27,919 Speaker 1: because a lot of the money being spent isn't by definition, 341 00:19:28,080 --> 00:19:31,440 Speaker 1: can't stimulate the economy right now, We're not people can't 342 00:19:31,440 --> 00:19:35,160 Speaker 1: spend it necessarily. It can only hend hold the economy 343 00:19:35,160 --> 00:19:38,280 Speaker 1: and suspended animation. Do you think that when the economy 344 00:19:38,359 --> 00:19:41,160 Speaker 1: does come back and people can go out and spend, 345 00:19:41,760 --> 00:19:44,919 Speaker 1: but we might actually see some of inflation Finally, as 346 00:19:44,960 --> 00:19:49,280 Speaker 1: a result of all this fiscal spending. I think the 347 00:19:49,320 --> 00:19:52,439 Speaker 1: money that's being handed out, though the overall number looks large, 348 00:19:53,160 --> 00:19:56,159 Speaker 1: it's for an individual household. It's a small amount. I 349 00:19:56,160 --> 00:19:58,480 Speaker 1: think this is more of US sustainments as opposed to 350 00:19:58,720 --> 00:20:03,840 Speaker 1: having excess of funding. No. You know, based on our projections, 351 00:20:03,880 --> 00:20:08,399 Speaker 1: we are looking at economic activity being below potential for 352 00:20:08,640 --> 00:20:12,840 Speaker 1: several quarters, and with that we you know, cannot expect 353 00:20:12,840 --> 00:20:17,600 Speaker 1: to see inflationary pressures um any time soon. It's one 354 00:20:17,640 --> 00:20:20,560 Speaker 1: final subject I wanted to touch on that the I 355 00:20:20,680 --> 00:20:22,439 Speaker 1: m F has put a lot of more focus on 356 00:20:22,520 --> 00:20:24,680 Speaker 1: over the last few years, and that's the relationship between 357 00:20:24,680 --> 00:20:28,399 Speaker 1: inequality and the economy and the economic damage that comes 358 00:20:28,400 --> 00:20:32,160 Speaker 1: from inequality as well as the social damage. I think 359 00:20:32,600 --> 00:20:35,280 Speaker 1: a lot of those costs have been brought home very 360 00:20:35,359 --> 00:20:38,399 Speaker 1: dramatically in this crisis. I mean, we've seen such a 361 00:20:38,400 --> 00:20:41,360 Speaker 1: difference between the situation of people working for large companies 362 00:20:41,400 --> 00:20:44,159 Speaker 1: or traditional companies and the situation of people at the 363 00:20:44,160 --> 00:20:46,439 Speaker 1: fringes of the labor market, for example, who are not 364 00:20:46,520 --> 00:20:49,560 Speaker 1: only on low incomes but potentially in the gig economy 365 00:20:49,680 --> 00:20:53,679 Speaker 1: with no job security and now no income. Do you 366 00:20:53,720 --> 00:20:56,720 Speaker 1: think we might see a rare evaluation of the role 367 00:20:56,800 --> 00:20:58,959 Speaker 1: of the state coming out of this, and maybe a 368 00:20:58,960 --> 00:21:02,960 Speaker 1: greater focus on providing rights, providing a safety net for 369 00:21:03,000 --> 00:21:05,439 Speaker 1: those parts of the workforce that turned out to be 370 00:21:05,600 --> 00:21:09,760 Speaker 1: so vulnerable to this crisis. I mean, for countries to 371 00:21:09,880 --> 00:21:12,720 Speaker 1: come out of this really grim situation, and this is 372 00:21:12,760 --> 00:21:14,639 Speaker 1: true for all countries in the world. It's going to 373 00:21:14,680 --> 00:21:19,880 Speaker 1: be important to get everybody to be able to survive 374 00:21:19,920 --> 00:21:23,760 Speaker 1: this crisis and to come out whold at the other end. 375 00:21:24,400 --> 00:21:29,280 Speaker 1: And so, you know, having this kind of inequality which 376 00:21:29,880 --> 00:21:33,960 Speaker 1: leads to permanent losses of income people coming up saying 377 00:21:33,960 --> 00:21:36,440 Speaker 1: out of the labor force where they can't maintain basic 378 00:21:36,560 --> 00:21:40,440 Speaker 1: livelihoods doesn't help anybody. It doesn't help. It doesn't help 379 00:21:40,480 --> 00:21:43,560 Speaker 1: even from a just a pure growth perspective. So I 380 00:21:43,600 --> 00:21:46,159 Speaker 1: think absolutely, I think it's very important for the world 381 00:21:46,680 --> 00:21:51,480 Speaker 1: to ensure that there are again I would just automatic 382 00:21:51,520 --> 00:21:54,119 Speaker 1: systems in place that get triggered whenever something like this 383 00:21:54,160 --> 00:21:56,560 Speaker 1: happens to ensure that people get the support that they 384 00:21:56,600 --> 00:22:00,280 Speaker 1: need and also to make sure that in normal times 385 00:22:00,840 --> 00:22:05,560 Speaker 1: that there is an equitable distribution of income in the world. 386 00:22:06,920 --> 00:22:08,280 Speaker 1: I'm sorry I said that was the last one, but 387 00:22:08,320 --> 00:22:10,800 Speaker 1: actually I do have one other question because I realized 388 00:22:10,800 --> 00:22:12,960 Speaker 1: I'm talking to you and I'm also reading the analysis 389 00:22:12,960 --> 00:22:16,240 Speaker 1: of our India economist Abishek Gupta about the impact of 390 00:22:16,240 --> 00:22:20,360 Speaker 1: the lockdown in India. As someone who is very familiar 391 00:22:20,359 --> 00:22:23,000 Speaker 1: with the Indian economy, I'm just thinking about the kind 392 00:22:23,040 --> 00:22:26,160 Speaker 1: of lockdown that's now being attempted there, what that means 393 00:22:26,200 --> 00:22:29,800 Speaker 1: for the economy. Do you feel that there's enough understanding 394 00:22:30,440 --> 00:22:32,800 Speaker 1: of the implications of that for a country such as 395 00:22:32,800 --> 00:22:37,080 Speaker 1: India with its enormous slum population and informal economy. Are 396 00:22:37,119 --> 00:22:41,080 Speaker 1: there enough programs there to prevent this kind of shutdown 397 00:22:41,160 --> 00:22:46,240 Speaker 1: being cataclysmic for a big chunk of the Indian population. Well, 398 00:22:46,280 --> 00:22:49,359 Speaker 1: it is essential to do what we're seeing there, and 399 00:22:49,440 --> 00:22:52,800 Speaker 1: I think it's the Indian government was right to UH 400 00:22:52,960 --> 00:22:57,479 Speaker 1: to move speedily and put these kinds of lockdowns in place, 401 00:22:58,240 --> 00:23:01,400 Speaker 1: you know, who have to make sure that this crisis 402 00:23:01,440 --> 00:23:06,400 Speaker 1: doesn't spiral out of control. Now, this has unfortunately had 403 00:23:06,480 --> 00:23:10,720 Speaker 1: a big effect on UH daily wage workers, and you've 404 00:23:10,720 --> 00:23:13,280 Speaker 1: seen this with migrant laborers who are going back to 405 00:23:13,320 --> 00:23:16,760 Speaker 1: the villages. And you know, this requires at the same 406 00:23:16,800 --> 00:23:19,520 Speaker 1: time as you're putting this containment in place, it requires 407 00:23:19,560 --> 00:23:24,480 Speaker 1: that the government supplies food transfers in kind, but also 408 00:23:24,560 --> 00:23:28,600 Speaker 1: cash transfers, and they they are doing several things in 409 00:23:28,640 --> 00:23:32,680 Speaker 1: this dimension. They are providing a relief to a lot 410 00:23:32,720 --> 00:23:36,560 Speaker 1: of workers, and I expect that they will do more 411 00:23:36,560 --> 00:23:40,760 Speaker 1: going forward. Enough, Chief Economists of the I m F, 412 00:23:40,880 --> 00:23:48,840 Speaker 1: thank you very much, Thank you, Sethny, thanks for listening 413 00:23:48,880 --> 00:23:51,199 Speaker 1: to Stephanomics. We'll be back next week with more on 414 00:23:51,240 --> 00:23:54,720 Speaker 1: how COVID nineteen is affecting the global economy. And remember 415 00:23:54,760 --> 00:23:57,680 Speaker 1: you can always find us on the Bloomberg terminal, website, 416 00:23:57,800 --> 00:24:00,680 Speaker 1: app or wherever you get your podcasts. For more news 417 00:24:00,720 --> 00:24:03,879 Speaker 1: and analysis during the week from Bloomberg Economics, you can 418 00:24:03,960 --> 00:24:07,159 Speaker 1: follow as Economics on Twitter. You can also find me 419 00:24:07,200 --> 00:24:10,920 Speaker 1: on at my Stephanomics. This episode was produced by Magnus Hendrickson, 420 00:24:11,160 --> 00:24:14,879 Speaker 1: with special thanks to get Gopinath and Katherine Bosley. Scott 421 00:24:14,960 --> 00:24:17,760 Speaker 1: Lamman is the executive producer of Stephanomics and the head 422 00:24:17,800 --> 00:24:20,080 Speaker 1: of Bloomberg Podcasts is Francesca Levi.