Speaker 1: Bloomberg Audio Studios, podcasts, radio News.
Speaker 2: Thank you so much, Matt. I am here with Kristalline Kerkava,
Speaker 2: the Managing director of the International Monetary Fund, at the
Speaker 2: time when the world leaders are all coming together. We
Speaker 2: spoke back and sprang and you seemed just a little
Speaker 2: bit more concerned.
Speaker 1: So did everybody here.
Speaker 2: There seems to be more optimistic tone.
Speaker 1: Why is that?
Speaker 3: Because since the Spring meetings, we have seen the world
Speaker 3: economy being quite resilient and very important. We have seen
Speaker 3: countries I think responsibly towards their own interest and the
Speaker 3: interests of the world. Let me unpack this one. We
Speaker 3: have upgraded our growth projections since April. Why because performance
Speaker 3: across the world is quite strong. Why is it strong
Speaker 3: because the tariff shock from the United States is.
Speaker 1: Not as dramatic as we feared in April.
Speaker 3: In April, if you recall, the announced startifs were twenty
Speaker 3: three percent. Today US studies nominally seventeen and a half percent,
Speaker 3: but what is being collected is somewhere around nine percent,
Speaker 3: So smaller shock from the US.
Speaker 1: Two.
Speaker 3: What did the rest of the world do, with the
Speaker 3: exception of China and initially Canada that retaliated against the
Speaker 3: United States. The rest of the world said, not it.
Speaker 3: For that, we are not going to engage in retaliatory action.
Speaker 3: So we have one hundred and ninety one members, one
Speaker 3: hundred and eighty eight of them decided to trade by
Speaker 3: the rules that exist.
Speaker 1: And the very interesting thing is you.
Speaker 3: Now see the value of strong fundamentals. Countries have built
Speaker 3: good institutions, they have built good policies, especially in the
Speaker 3: emergent world. Now we are seeing the pay back from
Speaker 3: that investment.
Speaker 2: So is just a reason why you think that it's
Speaker 2: legitimate for the market to be looking through some of
Speaker 2: the reason flare up in tensions between the US and
Speaker 2: China because ultimately trade keeps going and the world has
Speaker 2: sort of shown that it isn't really willing to escalate.
Speaker 1: To that degree.
Speaker 3: That is exactly the reason why everybody's calm even if
Speaker 3: China US tensions go up and down, because there is
Speaker 3: no spillover.
Speaker 1: But let me say this, we shouldn't be complacent.
Speaker 3: What we see is that Chinese goods that used to
Speaker 3: come to the United States are now redirected to Asia
Speaker 3: and to European Union.
Speaker 1: If this, recipients of Chinese.
Speaker 3: Goods feel the heat and decide that they too shoot
Speaker 3: impulse studies. We may still have the risk of a
Speaker 3: trade war moving from one place to another.
Speaker 1: So our message to everybody is.
Speaker 3: Be calm and to China, be careful, do not provoke
Speaker 3: other countries to see you as a threat to the economies.
Speaker 2: We talk about emerging markets and the resilience, so we've
Speaker 2: seen there, you talk about the potential lack of resilience
Speaker 2: in the developed world because of the fiscal overhanger. You
Speaker 2: started to seem like dynamics in the developed world.
Speaker 3: When we look at the prospects for the world economy,
Speaker 3: they're underwhelming. Growth is slow, death is high, and who
Speaker 3: leads on the death front advance economies. They have borrowed
Speaker 3: to meet the needs of people in covid when we
Speaker 3: had the shock from a Russia's war in Ukraine. Now
Speaker 3: they need to pull back what they're providing a support
Speaker 3: and it is very difficult. People like receiving they don't
Speaker 3: like losing what they have got. So we see everybody
Speaker 3: recognizing that that needs to go down, that fiscal consolidation
Speaker 3: needs to take place. Here in the United States, Secretary
Speaker 3: invest And says we need to get to three percent
Speaker 3: deficit but acting on these intentions is hard. Where I
Speaker 3: want to shout bravo to Italy. Traditionally Italy was.
Speaker 1: A country that was seen.
Speaker 3: As having real difficulty to tighten up. Now they are
Speaker 3: very likely to go below three percent deficit next year.
Speaker 1: So there are some bright spots.
Speaker 3: Greece is a fantastics There are some bright spots, but
Speaker 3: still bright spots on a dark horizon.
Speaker 2: And they had to get to a pretty dark place
Speaker 2: before they got to that bright spot. And I do wonder,
Speaker 2: I mean, how much it's swimming into a void.
Speaker 1: You know, reduce your debt, and.
Speaker 2: Everybody wants to keep getting their benefits. But I do
Speaker 2: wonder whether you see the ramifications of this in the
Speaker 2: price of gold. In this conversation that we have here
Speaker 2: about the basement of the dollar, do you think that
Speaker 2: those threats are real?
Speaker 3: The price of gold is going up because uncertainty has
Speaker 3: shot up, and it is staying very high. What do
Speaker 3: you do at the time of uncertainty. You try to
Speaker 3: anchor yourself in something that has proven value. When we
Speaker 3: look at the dollar over decades, the share of door
Speaker 3: in reserves globally has gone down somewhat, mostly because other
Speaker 3: countries have presented a good alternative, but they're all medium
Speaker 3: sized countries. For Australia, Sweden, Switzerland, even Eurozone is not
Speaker 3: that big to present an alternative to the door. And
Speaker 3: we need to remember people go for the door because
Speaker 3: of the depth of the capital markets in the United States,
Speaker 3: the liquidity, the size of the economy, the productivity of
Speaker 3: the American worker which is unmatched in other advanced economies.
Speaker 3: So yes, it is likely with the as the world
Speaker 3: becomes multipolar, it is likely to see this strength, but
Speaker 3: it is a slow, slow, slow process.
Speaker 2: I also want to ask you about Argentina and the
Speaker 2: US recently have this twenty billion.
Speaker 1: Dollars swap line.
Speaker 2: How I say IMF involved in that effort if at all.
Speaker 3: We work hand in hand with the Argentine authorities and
Speaker 3: with the partners of Argentina, first and foremost US Treasury
Speaker 3: because of the size of this support, but also the
Speaker 3: World Bank, the Inter American Development Bank, And we do
Speaker 3: it because we see a genuine change for the better
Speaker 3: in Argentina.
Speaker 1: Over the last two years.
Speaker 3: What have we seen from negative growth to four and
Speaker 3: a half percent this year and this is slower than
Speaker 3: last year. Inflation from triple digits down to twenty eight percent,
Speaker 3: deficit gone instead of it. That is surplus, very important,
Speaker 3: poverty trending down, and that means that there is something
Speaker 3: happening in Argentina.
Speaker 1: That is good for the future of Argentina.
Speaker 2: If Halvier Melai does not win the election, do you
Speaker 2: still have that optimism.
Speaker 3: Well, he will be there. He will be the president
Speaker 3: for some time to come. And I think that there
Speaker 3: is a still fairly strong support art in Argentina forgetting
Speaker 3: the country to be a normal economy in which regulations
Speaker 3: are meaningful and for purpose. There is a very big
Speaker 3: regulatory house cleaning that is taking place in Argentina. So
Speaker 3: I expect that even if we are in a somewhat
Speaker 3: different place, and frankly, we don't deal with politics. It
Speaker 3: is for the people of Argentina to decide. But when
Speaker 3: you look at the strength of the economic position of Argentina,
Speaker 3: it's good to sustain the country going on that path.
Speaker 2: Kristlinik Yorgeva, thank you so much for taking the time.
Speaker 2: Always a pleasure to speak with you. That was Krystallinic Yrkeeva,
Speaker 2: the Managing director of the International Monetary Fund here in Washington, DC,