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Speaker 1: Pierre Levier, thank you so much for joining us, especially

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Speaker 1: on the heels of this new report. So I want

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Speaker 1: to start first with the growth forecast for twenty twenty four.

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Speaker 1: They increased since the last report from the IMF in October.

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Speaker 2: What change, Well, we had a bit of good news.

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Speaker 2: So we have three point one percent growth for twenty

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Speaker 2: twenty four. That's a zero point two percentage point increase

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Speaker 2: compared to our October forecast.

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Speaker 3: And there are a combination of factors.

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Speaker 2: We see a lot of resilience in a number of

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Speaker 2: economies in the US, in China, and in many large

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Speaker 2: emerging market economies Brazil, India, Southeast Asian economies, Russia. So

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Speaker 2: all of this together that's what is lifting the growth

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Speaker 2: number for this year. Behind this, what we see is

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Speaker 2: we see strong demand in some countries private consumption, public consumption.

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Speaker 3: But we also see supply side forces.

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Speaker 2: We see the unwinding of remaining supply chains restrictions, we

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Speaker 2: see energy prices coming down, and we see a lot

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Speaker 2: of strength in labor markets.

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Speaker 1: It is China, though, a different story now than what

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Speaker 1: we've been seeing over the past few weeks, especially when

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Speaker 1: it comes to the property sector. Is there a concern.

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Speaker 2: Well, there is a concern with the property sector. It's

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Speaker 2: a concern that we already had back in October. The

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Speaker 2: property sector has not been doing well for some time now,

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Speaker 2: and what we're seeing is that one of the reasons

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Speaker 2: why we have slightly lower growth for China next year

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Speaker 2: compared to this year. So we're projecting four point six

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Speaker 2: percent in twenty twenty four five point two percent last year,

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Speaker 2: but that has been revised upwards because we have also

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Speaker 2: the Chinese government has been implementing a fiscal package that

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Speaker 2: is trying to support consumptions, trying to support households and investment,

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Speaker 2: and that is having some impact on growth.

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Speaker 3: Is it enough?

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Speaker 1: So many people are saying that it's not.

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Speaker 3: It may not be enough.

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Speaker 2: I mean, we are concerned that this is still going

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Speaker 2: to weigh down on output growth in China.

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Speaker 3: In years succumb.

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Speaker 2: We're also concerned about the more medium term growth prospects

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Speaker 2: for China.

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Speaker 3: They seem to be coming down from.

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Speaker 2: Sort of the turbocharged growth we've had in past decades,

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Speaker 2: and that's something that has to do with declining productivity growth,

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Speaker 2: declining demographics. So there are a number of headwinds for

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Speaker 2: the Chinese economy.

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Speaker 1: Where does AI play into that? Because I know you

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Speaker 1: talk a lot about AI and the report, and of

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Speaker 1: course there is the AI race between China and the US.

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Speaker 1: I mean, how does that position these two countries and

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Speaker 1: the potential growth, especially because you're saying it's positive.

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Speaker 2: Yeah, so AI potentially could have a big impact on

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Speaker 2: productivity in many countries around the world. There are very

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Speaker 2: different levels of preparedness when we look at emerging market economies,

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Speaker 2: low income countries versus advanced economies, and there are potentially

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Speaker 2: going to be big disruptions in labor markets. Different types

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Speaker 2: of jobs and occupations are going to be affected by

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Speaker 2: AI differently. Now in terms of the impact that's going

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Speaker 2: to have on overall productivity growth, it's a little bit

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Speaker 2: too early to really know.

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Speaker 3: We'll see.

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Speaker 2: But one of the things we do see in our study,

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Speaker 2: and we did a big study that we released very recently,

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Speaker 2: is that there's a bit of a winner take all

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Speaker 2: if you want, in the AI race. There are such

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Speaker 2: big affront investments. Whichever is the biggest companies are going

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Speaker 2: to get there and be able to develop it and

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Speaker 2: make it available, going to be capturing sizeable returns.

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Speaker 1: Do you see that materializing in twenty twenty four, or

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Speaker 1: as you said, is it too early every years off

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Speaker 1: for that.

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Speaker 2: Really, it's probably going to take a few years before

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Speaker 2: we see the full impact.

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Speaker 1: So let's talk about potentially the risks, because there's a

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Speaker 1: number of risks that are playing into the market potentially

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Speaker 1: being priced in, not necessarily in all cases. What do

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Speaker 1: you see as the biggest risk potentially to this growth

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Speaker 1: outlook for twenty twenty four.

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Speaker 3: Well, the risks.

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Speaker 2: That's the big difference compared to our earlier rounds of

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Speaker 2: provisions or forecasts as well, is the risks are more balanced.

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Speaker 2: So we have risks to the upside, we have risks

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Speaker 2: to the downside. On the upside, one of the big

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Speaker 2: news of twenty twenty three that we highlight in our

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Speaker 2: report is inflation has been coming down. I mean, growth

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Speaker 2: has been holding steady, inflation has been coming down. The

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Speaker 2: battle against inflation is being won, and that's very positive development.

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Speaker 2: It could continue, so we could have even more good

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Speaker 2: surprises on the inflation front, and that would allow central

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Speaker 2: banks to ease monetary polancies sooner and so that would

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Speaker 2: help lift growth. On the downside. We're concerned, of course

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Speaker 2: about geopolitical risk.

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Speaker 3: We see what's.

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Speaker 2: Happening in the Middle East, in the Red Sea. We

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Speaker 2: are concerned that there could be a tightening of financial

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Speaker 2: conditions that would increase interest rates even further than where

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Speaker 2: they are right now, and that will weigh down on

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Speaker 2: growth and activity.

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Speaker 1: Is there concern that the markets though there's a disconnect

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Speaker 1: right between what a lot of central bankers are saying

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Speaker 1: and what the markets are pricing in. Is that a

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Speaker 1: concern potentially as well.

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Speaker 2: Yeah, the markets seem to be very optimistic about or

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Speaker 2: they were especially so towards the end of last year,

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Speaker 2: and there's been some correction since, but they are somewhat

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Speaker 2: more optimistic about the pace at which central banks are

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Speaker 2: going to be cutting rates in twenty twenty four, We

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Speaker 2: at the funt time to believe that rates are likely

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Speaker 2: to hold steady until the second half of the year,

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Speaker 2: at least for the Federal Reserve, the European Central Bank,

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Speaker 2: the Bank of England, and then we will have probably

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Speaker 2: an easing of policy rates. The markets are a little

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Speaker 2: bit more optimistic, and that's another source of risk, because

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Speaker 2: if at some point they reassess then rates the rates

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Speaker 2: anticipated by the markets might go up.

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Speaker 1: Do you think that's going to happen because the markets

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Speaker 1: are pricing and potentially a march cut. So is that

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Speaker 1: really where we're headed at this point.

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Speaker 2: Well, we've already seen a little bit of a correction

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Speaker 2: in terms of how quickly they expect the central banks

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Speaker 2: to be cutting great, so we're seeing some of that process. Yes.

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Speaker 1: I want to also talk about elections because a lot

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Speaker 1: of the rest that you didn't mention and I didn't

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Speaker 1: see really in the report. There's over a more than

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Speaker 1: two dozen elections that are happening globally in the US,

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Speaker 1: across the EU, I mean India, there's a number of

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Speaker 1: countries to name. Is there a scenario that again gets

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Speaker 1: in the way of any sort of growth potential for

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Speaker 1: this year?

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Speaker 3: Yeah.

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Speaker 2: So twenty twenty four has been pointed out by a

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Speaker 2: number of people is one of the largest election years

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Speaker 2: in history, and I think more than half of the

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Speaker 2: world's population is going to be voting, And of course

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Speaker 2: that injects a certain amount of uncertainty in terms of

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Speaker 2: what policies will be implemented, both in the time leading

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Speaker 2: to elections and then after elections in case there are

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Speaker 2: changes in whoever is in position of government. The concern

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Speaker 2: that we have in particular of what we highlight in

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Speaker 2: our report is the battle against inflation is kind of one.

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Speaker 2: What is next, and what is next is to make

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Speaker 2: progress on fiscal policy right, to make sure that you know,

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Speaker 2: we bring back down the elevated debt levels, we reduce deficits.

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Speaker 2: There is a risk that in an election year in particular,

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Speaker 2: there is going to be some slippage compared to what

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Speaker 2: has been announced and we might see a little bit

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Speaker 2: more fiscal stimulus or a little bit less effort at

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Speaker 2: getting the fiscal house in order then would be desirable.

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Speaker 1: Where do you see where is it the most concerning?

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Speaker 1: Is it the US that a lot of people are

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Speaker 1: talking about, or is there somewhere else.

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Speaker 2: That you We've been pointing out that fiscal policy in

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Speaker 2: the US has been very expansionary, both you know, from

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Speaker 2: a cyclicical point of view and the structural point of view.

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Speaker 2: So it's certainly the case that some adjustment needs to

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Speaker 2: be done, and of course in an election year that

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Speaker 2: might be a little bit more complicated.

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Speaker 1: Let's also talk about South Africa, because we are in

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Speaker 1: South Africa. I mean, it's also a country that is

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Speaker 1: in the midst of an election coming soon, is there potentially,

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Speaker 1: I mean South Africa contributed to a lot of the

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Speaker 1: downward revision right for Sub Saharan Africa. Is it their

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Speaker 1: scenario for the selection in South Africa that further puts

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Speaker 1: downward pressure on this part of the world.

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Speaker 2: Well, I think we have a relatively weak growth rate

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Speaker 2: for South Africa in twenty twenty three zero point six

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Speaker 2: percent and a slight increase in twenty twenty four one percent,

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Speaker 2: But that's been revised down quite substantially from our October projection.

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Speaker 2: We were expecting in October one point eight percent for

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Speaker 2: twenty twenty four. Now we're only expecting one percent. And

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Speaker 2: what's behind this is really chiefly is all of the

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Speaker 2: disruptions we've seen in the energy sector and also in logistics,

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Speaker 2: in transportation, freight and ports in South Africa, in South Africa,

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Speaker 2: and so that's clearly one thing that is first ordered,

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Speaker 2: you know, that needs that needs to be you know, addressed.

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Speaker 2: That is something that the energy and logistics crisis need

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Speaker 2: to be. We need to find a solution, and that

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Speaker 2: will be sort of the basis upon which we can

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Speaker 2: have growth enhancing reforms coming down subsequently. So I think

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Speaker 2: that's the first the first item of business. Another concern

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Speaker 2: in the case of South Africa is you know, the

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Speaker 2: level public debt level has been rising quite significantly over

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Speaker 2: the last fifteen plus years, and that's something that is

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Speaker 2: you know, creating vulnerabilities for South Africa, and so we

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Speaker 2: also recommend we were talking about the need for fiscal

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Speaker 2: consolidation for South Africa. There is a need also to

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Speaker 2: bring public spending under control and to raise tax revenues.

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Speaker 1: But it's unlikely that we're going to get that in

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Speaker 1: the first half of the year. And I mean you

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Speaker 1: mentioned tax revenues. A country like Kenya is seeing the

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Speaker 1: repercussions of raising taxes. You know, civilians are protesting across

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Speaker 1: Europe as well. I mean, what's the likelihood we're going

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Speaker 1: to see anything in the first half.

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Speaker 2: It's difficult. It's difficult, and it has to be done

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Speaker 2: in a way. And that's what we emphasize also at

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Speaker 2: the Fund that protects Vulnerable. I mean, it's obviously when

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Speaker 2: you raise taxes or when you cut some spending and

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Speaker 2: some of that spending maybe going to the most vulnerable

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Speaker 2: in society, we have to be very careful. We have

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Speaker 2: so this is to be part of packages are well designed.

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Speaker 1: And I want to just finish off on oil prices

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Speaker 1: and what we're seeing in the Middle East. Of course,

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Speaker 1: the situation is changing day by day. I know that's

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Speaker 1: part of the risk. But what exactly do you think

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Speaker 1: is the biggest risk to the situation in the Middle East?

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Speaker 1: Is it oil prices, is it potentially supply chain disruptions?

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Speaker 1: What is it that the IMF is most concerned about here.

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Speaker 2: Well, what we've seen since October of last year is,

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Speaker 2: of course there's been some disruptions in the maritime shipping

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Speaker 2: going through the Red Sea and the Swiss Canal, and

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Speaker 2: we've seen the increase in shipping costs from Asia to Europe.

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Speaker 2: They've increased quite substantially. As you know, ships have to

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Speaker 2: be routed around Africa instead of going through the Swiss Canal,

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Speaker 2: so the cost have increased. Right now, the impact, the

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Speaker 2: global impact, if you want, on the cost of importing

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Speaker 2: goods and on overall price levels has been very limited

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Speaker 2: and there hasn't been much of an impact on oil

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Speaker 2: and energy prices. We are still in the world in

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Speaker 2: which the global economy is growing at three point one.

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Speaker 2: That's good news in the sense because it's not a

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Speaker 2: lower number, but it's not a number that is as

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Speaker 2: high as we are used to in the global economy.

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Speaker 2: More like three point eight is what historically we're used to.

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Speaker 2: And so the global economy is not growing very rapidly,

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Speaker 2: and that means there is less demand, a bit less

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Speaker 2: demand for energy and commodities, and so that is putting

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Speaker 2: downward pressure. And despite the tensions in the Red Sea

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Speaker 2: and in that part of the world, we haven't seen

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Speaker 2: increase in oild price. But of course that means it's

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Speaker 2: a risk factor. You know, if the conflict escalates, if

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Speaker 2: there are disruptions to oil shipments, then we could see

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Speaker 2: a very different.

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Speaker 1: It's a concern too for a place like Saudi Arabia,

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Speaker 1: right that has historically relied on oil revenue. I mean,

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Speaker 1: is that a concern then for the Middle East region?

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Speaker 1: Then potentially with growth prospects.

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Speaker 2: Well, what's seeing what we are seeing in Saudi Arabia

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Speaker 2: is indeed the fact that their growth prospects have been

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Speaker 2: reduced from what we were projecting in twenty twenty three.

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Speaker 2: The growth for twenty twenty four now is expected to

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Speaker 2: be about two point seven percent and a large part

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Speaker 2: of the revision comes from the fact that Saudi Arabia

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Speaker 2: has implemented reduction in oil supply in order to try

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Speaker 2: to keep the price up.

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Speaker 3: As part of the OPEC, plus a group of.

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Speaker 2: Countries that have implemented reduction in old supplies, and of

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Speaker 2: course that is weighing down on their growth prospects. So

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Speaker 2: they are, of course an economy that has a growing

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Speaker 2: non oil component but is still very dependent on oil revenues,

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Speaker 2: and reduction in oil exports are going to weigh down

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Speaker 2: on their growth process.

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Speaker 1: So that's the expectation for the rest of twenty twenty four. Yes, finally,

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Speaker 1: I was getting a little bit of a note about

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Speaker 1: Europe because I touched on it briefly. We're getting some

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Speaker 1: data out of Europe today, but in particular we're hearing

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Speaker 1: Germany potentially contracted at the end of twenty twenty three.

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Speaker 1: The expectation for the rest of twenty four is that

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Speaker 1: the economy will potentially stagnate. I mean, is there a

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Speaker 1: mistake that could be made though in the Euro Area

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Speaker 1: to further deteriorate what we're seeing in a lot of

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Speaker 1: these economies.

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Speaker 3: So the Euro Area, we are.

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Speaker 2: Expecting growth that is not quite signating there was the

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Speaker 2: zero point five percent percent growth last year and we're

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Speaker 2: expecting zero point nine percent growth this year. So zero

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Speaker 2: pot nine is a low number, but it's not stagnation.

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Speaker 2: But we are seeing a region that has been hit

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Speaker 2: by the energy crisis. It's been hit full force by

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Speaker 2: the energy crisis, and the tightening of monetary policy is

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Speaker 2: also weighing down. So the risk at this point for

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Speaker 2: central banks like the European Central Bank is twofold. I mean,

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Speaker 2: they need to make sure that the last bits of

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Speaker 2: information in the system are going to be coming back

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Speaker 2: and information is going to hit the targets, and right now,

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Speaker 2: the baseline is that they're going to get there some time,

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Speaker 2: you know, towards the end of.

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Speaker 3: Twenty twenty four and beginning of twenty twenty five.

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Speaker 2: But if they keep interest rates high too long while

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Speaker 2: information is coming down, there is a risk that they

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Speaker 2: could tip over a relatively fragile economy into recession. So

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Speaker 2: it's a delicate balance right now. As we discussed earlier,

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Speaker 2: they're expected to keep rates where they are, see where

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Speaker 2: the wage growth numbers are going to come in in

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Speaker 2: the first part of the year, and see whether that

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Speaker 2: is you know, consistent with the decline of information back

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Speaker 2: towards the target, at which point they will be able

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Speaker 2: to ease policy rates, or if they have to stop,

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Speaker 2: you know, to keep them where they are, because there

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Speaker 2: is still a little bit too much inflation in the system.

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Speaker 1: Right, all right, Kiera Levi, we're gonna leave it there.

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Speaker 1: Thank you so much for your time, Thanks for your insights,