1 00:00:06,620 --> 00:00:09,980 Speaker 1: Welcome to Covid Time, a podcast series on markets and 2 00:00:09,980 --> 00:00:13,360 Speaker 1: economies from devious group research. I'm time Rubik chief economist 3 00:00:13,369 --> 00:00:16,180 Speaker 1: welcoming you to our 94th episode 4 00:00:16,850 --> 00:00:17,840 Speaker 2: and 5 00:00:17,850 --> 00:00:20,970 Speaker 1: staff of the international monetary fund or the I. M. F. 6 00:00:20,980 --> 00:00:25,100 Speaker 1: I have had many friends and colleagues uh appear in 7 00:00:25,100 --> 00:00:30,290 Speaker 1: copy time uh including Raghuram rajan and Kruger of its Romanian, 8 00:00:30,300 --> 00:00:33,900 Speaker 1: Mark sobel. But I've never had the pleasure of hosting 9 00:00:33,909 --> 00:00:36,550 Speaker 1: a currently serving staff. Until today. 10 00:00:37,010 --> 00:00:41,260 Speaker 1: Krishna Srinivasan is the director of IMF's ASia and pacific 11 00:00:41,260 --> 00:00:45,670 Speaker 1: department in his nearly three decades with the organization, Krishna 12 00:00:45,670 --> 00:00:49,970 Speaker 1: has had done it all overseeing the work on china 13 00:00:49,979 --> 00:00:52,420 Speaker 1: south Korea brazil, Canada Mexico 14 00:00:52,435 --> 00:00:56,815 Speaker 1: UK and many more countries program surveillance. You take your pick. 15 00:00:56,825 --> 00:01:00,595 Speaker 1: Krishna has also worked at the funds research department leading 16 00:01:00,595 --> 00:01:04,035 Speaker 1: the IMF's work on the G 20 the context of 17 00:01:04,035 --> 00:01:07,854 Speaker 1: the global financial crisis. Krishna Srinivasan, welcome to Kobe time. 18 00:01:08,760 --> 00:01:10,610 Speaker 2: Thank you to more good to see you and good 19 00:01:10,610 --> 00:01:11,510 Speaker 2: to meet with you. 20 00:01:11,520 --> 00:01:13,910 Speaker 1: Good to see you too. And hopefully I get to 21 00:01:13,910 --> 00:01:16,569 Speaker 1: see you in Asia sooner or later so that we 22 00:01:16,569 --> 00:01:18,930 Speaker 1: can actually have a copy or coffee. 23 00:01:19,260 --> 00:01:23,720 Speaker 1: Um but I'm gonna start with a housekeeping question. Asia 24 00:01:23,720 --> 00:01:27,190 Speaker 1: as the typical definition goes stretches from the pacific islands 25 00:01:27,190 --> 00:01:30,380 Speaker 1: to the east to Saudi Arabia and parts of turkiye 26 00:01:30,390 --> 00:01:33,240 Speaker 1: to the west. What is the scope of coverage of 27 00:01:33,250 --> 00:01:36,390 Speaker 1: the I. M. S. Asia department because I think I 28 00:01:36,390 --> 00:01:38,910 Speaker 1: understand not all of Asia is covered by a P. D. 29 00:01:39,530 --> 00:01:45,190 Speaker 2: Right, so so far we have 37 countries in a P. D. 30 00:01:45,200 --> 00:01:49,130 Speaker 2: And this covers a large countries in china India Japan 31 00:01:49,130 --> 00:01:52,900 Speaker 2: to the small islands in the pacific. I mean just 32 00:01:52,900 --> 00:01:55,010 Speaker 2: in terms of put things in perspective, I think the 33 00:01:55,010 --> 00:01:58,280 Speaker 2: country is covered by a P. D. Account for about 50% 34 00:01:58,280 --> 00:02:01,490 Speaker 2: of world population and about 40% of 35 00:02:01,505 --> 00:02:04,335 Speaker 2: global G. D. P. And P. P. P. Terms. Right? 36 00:02:04,345 --> 00:02:08,405 Speaker 2: And I think the countries which don't are not part 37 00:02:08,405 --> 00:02:11,234 Speaker 2: of a P. D. Are countries like Afghanistan and Pakistan 38 00:02:11,245 --> 00:02:13,764 Speaker 2: which are in the Middle Eastern Department. So we have 39 00:02:13,764 --> 00:02:17,135 Speaker 2: 37 countries which is about 1/5 of the M. S. 40 00:02:17,135 --> 00:02:20,294 Speaker 2: Membership which is about 1 90. And it has a 41 00:02:20,305 --> 00:02:23,395 Speaker 2: bunch of countries range from the small to the very big. 42 00:02:24,260 --> 00:02:28,310 Speaker 1: Right? So all of A C. In North Asia pacific 43 00:02:28,310 --> 00:02:31,120 Speaker 1: islands and a large chunk of South Asia with the 44 00:02:31,120 --> 00:02:33,080 Speaker 1: exception of Pakistan and the Middle East is in the 45 00:02:33,080 --> 00:02:37,760 Speaker 1: Middle Eastern Department. Got you. And you have staff in 46 00:02:37,760 --> 00:02:40,850 Speaker 1: both Washington D. C. And in various parts of Asia. 47 00:02:40,860 --> 00:02:42,610 Speaker 1: So give us a sense of how your work is 48 00:02:42,610 --> 00:02:46,480 Speaker 1: divided between AsIA location wise. As well as your D. C. 49 00:02:46,480 --> 00:02:47,540 Speaker 1: Based staff. 50 00:02:47,800 --> 00:02:51,160 Speaker 2: Right? So so memorize your very familiar, you know the I. M. F. 51 00:02:51,160 --> 00:02:53,650 Speaker 2: Mainly even think in terms of three strands of work 52 00:02:53,660 --> 00:02:58,850 Speaker 2: surveillance lending and capacity development. Right? So if you look 53 00:02:58,850 --> 00:03:02,910 Speaker 2: at what how we divide divide the department into field 54 00:03:02,910 --> 00:03:06,830 Speaker 2: based and headquarters base, we have I think what we 55 00:03:06,830 --> 00:03:09,240 Speaker 2: call as residents represented in 13 countries 56 00:03:09,610 --> 00:03:13,489 Speaker 2: and then we also have an office in Japan in Tokyo, 57 00:03:13,490 --> 00:03:15,620 Speaker 2: it's called the Office of Asia and pacific. And we 58 00:03:15,620 --> 00:03:19,450 Speaker 2: also have three training centers, the Singapore Training Center, the 59 00:03:19,450 --> 00:03:21,990 Speaker 2: one the SAR tech in in India. And we have 60 00:03:22,200 --> 00:03:24,669 Speaker 2: back in the in the pacific islands. So in terms 61 00:03:24,669 --> 00:03:25,180 Speaker 2: of how we do 62 00:03:25,195 --> 00:03:28,625 Speaker 2: The work in comparison to say the World Bank where 50% 63 00:03:28,625 --> 00:03:31,785 Speaker 2: of staff are in the field, 50% quarters, I would 64 00:03:31,785 --> 00:03:35,295 Speaker 2: say a very small proportion of our staff are in 65 00:03:35,295 --> 00:03:38,585 Speaker 2: the field. So say all over, I would say we 66 00:03:38,585 --> 00:03:39,945 Speaker 2: have a total staff strength of one 67 00:03:39,945 --> 00:03:41,295 Speaker 1: 60 68 00:03:41,305 --> 00:03:43,735 Speaker 2: I would say 20 are in the field. 69 00:03:43,900 --> 00:03:46,290 Speaker 2: So we are much smaller compared to the World Bank. 70 00:03:46,290 --> 00:03:49,270 Speaker 2: When it comes to field office presidents that said, we 71 00:03:49,270 --> 00:03:53,880 Speaker 2: coordinate very closely our work on both surveillance lending and 72 00:03:53,880 --> 00:03:56,780 Speaker 2: capacity development. And the rule of restaurants becomes that much 73 00:03:56,780 --> 00:03:58,760 Speaker 2: more important. When you have a program for instance, we 74 00:03:58,760 --> 00:04:02,490 Speaker 2: have a program in Sri Lanka in Bangladesh and so 75 00:04:02,490 --> 00:04:05,530 Speaker 2: on there. The the resident representative, 76 00:04:05,730 --> 00:04:08,400 Speaker 2: it is a very important player because she or he 77 00:04:08,410 --> 00:04:12,380 Speaker 2: really provides hands on support to the country in the field, 78 00:04:12,390 --> 00:04:15,000 Speaker 2: which is very important to make sure that there's a 79 00:04:15,000 --> 00:04:17,979 Speaker 2: full information flow between the I. M. F. And the 80 00:04:17,980 --> 00:04:20,839 Speaker 2: country authorities in terms of what's expected of them, the 81 00:04:20,850 --> 00:04:23,260 Speaker 2: role of policies and so on so forth. Now when 82 00:04:23,260 --> 00:04:26,320 Speaker 2: it comes to surveillance again, they play an important role 83 00:04:26,330 --> 00:04:27,560 Speaker 2: by 84 00:04:27,940 --> 00:04:28,410 Speaker 1: taking 85 00:04:28,410 --> 00:04:30,930 Speaker 2: a message to the country and to the region. And 86 00:04:30,930 --> 00:04:32,770 Speaker 2: again when it comes to regional office, we have one 87 00:04:32,770 --> 00:04:35,890 Speaker 2: in Japan in Tokyo, which is really the hub for us. 88 00:04:35,900 --> 00:04:40,050 Speaker 2: And they disseminate the research, they disseminate the surveillance across 89 00:04:40,050 --> 00:04:43,420 Speaker 2: countries in the region. And so do the tech centers, 90 00:04:43,430 --> 00:04:47,770 Speaker 2: the technical centers in Singapore India and in the in 91 00:04:47,770 --> 00:04:49,870 Speaker 2: the pacific play a very, very important 92 00:04:49,885 --> 00:04:53,164 Speaker 2: role in providing capacity development support to all our members 93 00:04:53,165 --> 00:04:57,974 Speaker 2: in that particular region. For example. Startech focusing on South Asia, 94 00:04:57,985 --> 00:05:00,615 Speaker 2: you know, S. T. I. Is much broader and so 95 00:05:00,615 --> 00:05:04,435 Speaker 2: on so forth. So again, it's depending upon the program, 96 00:05:04,445 --> 00:05:08,294 Speaker 2: depending on our engagement as a program of surveillance restaurants play, 97 00:05:08,305 --> 00:05:11,245 Speaker 2: you know, rules which are very, very important, strategic and 98 00:05:11,245 --> 00:05:11,815 Speaker 2: so on. 99 00:05:12,410 --> 00:05:16,620 Speaker 1: Krisha. The World Bank has many very senior staff based 100 00:05:16,620 --> 00:05:18,719 Speaker 1: in Asia. Do you have some of your senior staff 101 00:05:18,730 --> 00:05:19,420 Speaker 1: based here? 102 00:05:19,930 --> 00:05:22,430 Speaker 2: Yeah, we do. For example, we do have what we 103 00:05:22,430 --> 00:05:26,040 Speaker 2: call a senior resident representatives right now. We have them 104 00:05:26,040 --> 00:05:30,230 Speaker 2: in three countries China India and Indonesia. All three are 105 00:05:30,240 --> 00:05:32,700 Speaker 2: G20 countries as you would imagine. And so we have 106 00:05:32,700 --> 00:05:37,610 Speaker 2: senior resident representative in other countries. We have staff who 107 00:05:37,610 --> 00:05:40,650 Speaker 2: are a bit more junior in terms of seniority and rank, 108 00:05:40,660 --> 00:05:43,650 Speaker 2: but they play equally important role and sometimes more important 109 00:05:43,650 --> 00:05:47,080 Speaker 2: role because the program countries uh and so on. 110 00:05:47,510 --> 00:05:51,370 Speaker 1: Absolutely from my personal experience having worked on some program countries, 111 00:05:51,370 --> 00:05:53,940 Speaker 1: both in a P. D. And elsewhere. And I. M. F. 112 00:05:53,950 --> 00:05:57,190 Speaker 1: The Western representatives were like a lifeline for the authorities 113 00:05:57,190 --> 00:05:59,660 Speaker 1: to get a sense of what Washington was thinking. So 114 00:05:59,670 --> 00:06:02,350 Speaker 2: I think I think I think 11 just one part 115 00:06:02,350 --> 00:06:03,230 Speaker 2: is when we have a 116 00:06:03,255 --> 00:06:05,995 Speaker 2: program with the country, for example, we have a program 117 00:06:05,995 --> 00:06:11,595 Speaker 2: with Bangladesh and Nepal. We usually appoint resident represented 118 00:06:11,605 --> 00:06:12,965 Speaker 1: there so 119 00:06:12,964 --> 00:06:16,094 Speaker 2: that they can be the liaison between the country and 120 00:06:16,095 --> 00:06:18,515 Speaker 2: the staff so that things work well in the program 121 00:06:18,515 --> 00:06:19,000 Speaker 2: so on. 122 00:06:19,210 --> 00:06:24,130 Speaker 1: Right. Absolutely. Krishna last week here in Singapore, in fact, 123 00:06:24,140 --> 00:06:27,409 Speaker 1: the I M. F. Released an update of the global 124 00:06:27,410 --> 00:06:32,440 Speaker 1: and regional outlook. So how is 23 looking? Let's talk 125 00:06:32,440 --> 00:06:35,290 Speaker 1: a little bit about your top upside and downside risks. 126 00:06:35,580 --> 00:06:38,850 Speaker 2: Right. So I mean this is this one the news 127 00:06:38,850 --> 00:06:40,840 Speaker 2: to you. But you know, the global economy is poised 128 00:06:40,839 --> 00:06:43,479 Speaker 2: to slow this year before rebounding next year. So we 129 00:06:43,480 --> 00:06:48,630 Speaker 2: have growth coming down from 3.4% in 2022 to 2.9% 130 00:06:48,630 --> 00:06:53,940 Speaker 2: in 2023 and then rebounds to 3.1%. But generally 131 00:06:54,020 --> 00:06:57,750 Speaker 2: speaking growth will remain weak by historical standards as a 132 00:06:57,750 --> 00:07:02,250 Speaker 2: fight against inflation and the war in Ukraine continues those 133 00:07:02,250 --> 00:07:07,230 Speaker 2: are both headwinds to growth. But despite despite these headwinds, 134 00:07:07,230 --> 00:07:10,150 Speaker 2: I would say that we are less gloomy than we 135 00:07:10,150 --> 00:07:12,460 Speaker 2: were say 23 months ago in october 136 00:07:12,660 --> 00:07:14,950 Speaker 2: and that's partly because and why are we, why are 137 00:07:14,950 --> 00:07:18,160 Speaker 2: we reading? I would say what's the right word? Cautiously 138 00:07:18,160 --> 00:07:22,700 Speaker 2: optimistic is because I think we have made some we've 139 00:07:22,700 --> 00:07:25,140 Speaker 2: had some success on all three fronts 140 00:07:25,420 --> 00:07:29,370 Speaker 2: in Q three and 2022 was very resilient. So that 141 00:07:29,370 --> 00:07:33,590 Speaker 2: gave a huge fillip to the world economy. Uh And 142 00:07:33,590 --> 00:07:36,390 Speaker 2: and labor markets are strong notably in the U. S. 143 00:07:36,400 --> 00:07:42,290 Speaker 2: And that's you know really beefed up help increase consumption demand, investment, demand, 144 00:07:42,300 --> 00:07:44,260 Speaker 2: inflation is 145 00:07:44,890 --> 00:07:48,400 Speaker 2: Coming down headline inflation for sure is coming down. So 146 00:07:48,400 --> 00:07:52,400 Speaker 2: that's provided some support to the economy and finally global 147 00:07:52,400 --> 00:07:56,820 Speaker 2: financial conditions have also eased across. So that gives me 148 00:07:56,830 --> 00:08:00,670 Speaker 2: some optimism that 2023 149 00:08:00,685 --> 00:08:03,304 Speaker 2: could be the year of turning points where growth bottoms 150 00:08:03,305 --> 00:08:07,415 Speaker 2: out and inflation kind of peaks. The question of course 151 00:08:07,425 --> 00:08:09,665 Speaker 2: is what does it mean for the region? I guess 152 00:08:09,665 --> 00:08:11,545 Speaker 2: you want to go talk about the region. I think 153 00:08:11,545 --> 00:08:14,535 Speaker 2: the same kind of cautions optimism carries forward to the 154 00:08:14,535 --> 00:08:16,465 Speaker 2: region and again, 155 00:08:16,900 --> 00:08:17,179 Speaker 1: if 156 00:08:17,180 --> 00:08:19,400 Speaker 2: you would ask me what is something different this time 157 00:08:19,400 --> 00:08:22,150 Speaker 2: around in Asia. I think the main thing is china 158 00:08:22,160 --> 00:08:25,860 Speaker 2: right with china opening up from it has a zero 159 00:08:25,860 --> 00:08:28,750 Speaker 2: Covid strategy for a long time. It's opened up. In 160 00:08:28,750 --> 00:08:31,800 Speaker 2: fact it opened it opened up faster than we expected 161 00:08:31,810 --> 00:08:34,859 Speaker 2: more quickly than we expected. So that's providing a huge 162 00:08:34,870 --> 00:08:37,880 Speaker 2: boost to consumption. So to to grow this hill. So 163 00:08:37,880 --> 00:08:41,380 Speaker 2: in 2023 we expect growth in china at five point 164 00:08:41,380 --> 00:08:42,090 Speaker 1: 2% 165 00:08:42,390 --> 00:08:45,660 Speaker 2: Which is 3%. What is what we had in 2022 166 00:08:45,670 --> 00:08:48,010 Speaker 2: which is very low compared to Chinese standards. 167 00:08:48,010 --> 00:08:48,480 Speaker 1: Right? 168 00:08:49,050 --> 00:08:53,640 Speaker 2: So in 2023 we have 5.2%. You add that to 169 00:08:53,650 --> 00:08:57,370 Speaker 2: a slight slight uptick in our growth forecast for Japan 170 00:08:57,380 --> 00:08:58,829 Speaker 2: at 1.8% 171 00:08:59,030 --> 00:09:03,760 Speaker 2: And India at 6.1%. So these three countries are really 172 00:09:03,760 --> 00:09:06,120 Speaker 2: the engine of growth for the region and for the 173 00:09:06,120 --> 00:09:09,030 Speaker 2: global economy in fact time or whether you notice, it 174 00:09:09,030 --> 00:09:13,050 Speaker 2: but China and India together account for 50% of global 175 00:09:13,050 --> 00:09:14,150 Speaker 2: growth in 2020 176 00:09:14,150 --> 00:09:15,080 Speaker 1: three which is 177 00:09:15,080 --> 00:09:17,469 Speaker 2: quite significant. Right? So I think that's the, that's a 178 00:09:17,470 --> 00:09:19,480 Speaker 2: story for the globe and for the region 179 00:09:20,190 --> 00:09:20,850 Speaker 1: in terms of 180 00:09:20,850 --> 00:09:23,910 Speaker 2: risks again, it's a very pertinent 181 00:09:23,910 --> 00:09:24,620 Speaker 1: question. 182 00:09:25,160 --> 00:09:26,880 Speaker 2: I would say the risks are 183 00:09:27,520 --> 00:09:30,530 Speaker 2: similar to the upside and downside. So for instance we've 184 00:09:30,530 --> 00:09:33,880 Speaker 2: had china opening up, right? So if china opens up, 185 00:09:33,890 --> 00:09:36,790 Speaker 2: if consumption picks up, if mobility picks up and consumption 186 00:09:36,790 --> 00:09:39,540 Speaker 2: picks up very strongly then you could have a much 187 00:09:39,540 --> 00:09:44,370 Speaker 2: bigger impact on global growth and the region. Right? Again, 188 00:09:44,380 --> 00:09:48,620 Speaker 2: if inflation comes on faster and global financial conditions is 189 00:09:48,630 --> 00:09:52,270 Speaker 2: uh more than you could see a big upside to 190 00:09:52,280 --> 00:09:55,560 Speaker 2: the global economy. On the other hand, if china 191 00:09:55,575 --> 00:09:59,265 Speaker 2: the opening up leads to new irises a new new 192 00:09:59,265 --> 00:10:02,205 Speaker 2: strands and if things slow down Mobley doesn't pick up, 193 00:10:02,215 --> 00:10:05,675 Speaker 2: that could be a headwind to growth. If the war 194 00:10:05,684 --> 00:10:10,485 Speaker 2: escalates further, that could be a downside risks to growth. 195 00:10:10,495 --> 00:10:13,635 Speaker 2: So there are both upside and downside risks to growth 196 00:10:13,645 --> 00:10:16,314 Speaker 2: and I think that's where we have a very interesting 197 00:10:16,315 --> 00:10:18,715 Speaker 2: field but I think overall I would say that we 198 00:10:18,715 --> 00:10:22,905 Speaker 2: are a bit more optimistic than we were say 23 199 00:10:22,905 --> 00:10:23,625 Speaker 2: months ago. 200 00:10:23,970 --> 00:10:28,510 Speaker 1: So Christian if I understand correctly, your developed market growth 201 00:10:28,510 --> 00:10:33,520 Speaker 1: forecast for 23 is lower than 22 but you're emerging-market 202 00:10:33,520 --> 00:10:36,600 Speaker 1: forecast particularly around the China narrative that you just described 203 00:10:36,610 --> 00:10:39,350 Speaker 1: is somewhat higher in 23 than 22. 204 00:10:39,490 --> 00:10:43,570 Speaker 1: Um We we saw interest rates go up substantially last 205 00:10:43,570 --> 00:10:46,709 Speaker 1: year that created tightness in liquidity that had a lot 206 00:10:46,710 --> 00:10:49,940 Speaker 1: of problems created a lot of problem in emerging market economies, 207 00:10:49,950 --> 00:10:53,470 Speaker 1: interest rates will remain high this year. If anything maybe 208 00:10:53,470 --> 00:10:56,020 Speaker 1: in real terms they'll go up because inflation is falling. 209 00:10:56,030 --> 00:10:58,540 Speaker 1: That is not a big source of worry for you. 210 00:10:59,460 --> 00:11:03,440 Speaker 2: So so let me just answer that question first. So 211 00:11:03,450 --> 00:11:05,690 Speaker 2: if you look at emerging markets and in fact if 212 00:11:05,690 --> 00:11:07,860 Speaker 2: you look at emerging markets in asia 213 00:11:08,010 --> 00:11:11,020 Speaker 2: you still have headline inflation has come down the code 214 00:11:11,020 --> 00:11:16,020 Speaker 2: inflation is still about central bank targets. So the advice 215 00:11:16,020 --> 00:11:18,840 Speaker 2: would be to stay the course right so that inflation 216 00:11:18,840 --> 00:11:21,830 Speaker 2: comes on a more durable basis because the worst kind 217 00:11:21,830 --> 00:11:24,150 Speaker 2: of tax you can think of. So you want inflation 218 00:11:24,150 --> 00:11:26,790 Speaker 2: to come down core inflation to come down so that 219 00:11:26,800 --> 00:11:29,680 Speaker 2: is going to be a drag on on some economies 220 00:11:29,679 --> 00:11:30,890 Speaker 2: right at the same, 221 00:11:30,900 --> 00:11:34,210 Speaker 2: you also have the china factor which comes into play, 222 00:11:34,220 --> 00:11:37,730 Speaker 2: external demand is improving in for some of these countries. 223 00:11:37,740 --> 00:11:40,809 Speaker 2: So that provides some support. So on the one hand 224 00:11:40,809 --> 00:11:43,719 Speaker 2: you have interest rates which are likely to tighten, but 225 00:11:43,720 --> 00:11:45,500 Speaker 2: you also have the china factor which is going to 226 00:11:45,500 --> 00:11:47,900 Speaker 2: give a big fillip to some countries for instance, which 227 00:11:47,900 --> 00:11:50,850 Speaker 2: are tightly linked to the chinese market. Right? I think 228 00:11:50,850 --> 00:11:53,780 Speaker 2: we're still, you know, we still haven't fully absorbed in 229 00:11:53,790 --> 00:11:57,410 Speaker 2: impact of what china is opening up means and the 230 00:11:57,410 --> 00:12:00,310 Speaker 2: part of china opening up for some countries in the region. 231 00:12:00,320 --> 00:12:03,010 Speaker 2: Uh you know, we had, when we made the revisions 232 00:12:03,010 --> 00:12:05,750 Speaker 2: to china, we had teams which had already finalizing the numbers. 233 00:12:05,760 --> 00:12:07,160 Speaker 2: So there's some more 234 00:12:07,170 --> 00:12:07,939 Speaker 1: work to 235 00:12:07,950 --> 00:12:10,890 Speaker 2: be done our part to see how the china opening 236 00:12:10,890 --> 00:12:14,370 Speaker 2: up bears upon prospects for countries in the region. So 237 00:12:14,370 --> 00:12:16,100 Speaker 2: that could be a big plus and 238 00:12:16,110 --> 00:12:17,449 Speaker 1: if, sorry, 239 00:12:17,460 --> 00:12:18,660 Speaker 2: and if 240 00:12:19,320 --> 00:12:23,260 Speaker 2: and and and and if uh, you know, commodity prices 241 00:12:23,260 --> 00:12:26,490 Speaker 2: come down and so on. It all provides further fillip 242 00:12:26,490 --> 00:12:30,290 Speaker 2: to the economic prospects. But yes, inflation is still, it's 243 00:12:30,290 --> 00:12:34,280 Speaker 2: still a concern. We want policies to address that 244 00:12:34,450 --> 00:12:39,030 Speaker 2: When it comes to monetary policy. But in fiscal policy two, 245 00:12:39,030 --> 00:12:41,850 Speaker 2: we want fiscal policy to go hand in glove with 246 00:12:41,850 --> 00:12:45,260 Speaker 2: monetary policy. So we want more targeted support being provided 247 00:12:45,260 --> 00:12:47,710 Speaker 2: to countries. So some of that in fact some of 248 00:12:47,710 --> 00:12:51,040 Speaker 2: the countries have given support which may kind of wean 249 00:12:51,040 --> 00:12:53,689 Speaker 2: off this year. So you will see some drag going 250 00:12:53,690 --> 00:12:54,940 Speaker 2: into 2024, 251 00:12:56,360 --> 00:13:00,250 Speaker 1: Right? So related to that, we had to spend a 252 00:13:00,250 --> 00:13:04,160 Speaker 1: lot of money on emergency basis in 2020 and 2021. 253 00:13:04,160 --> 00:13:07,120 Speaker 1: And we saw debt ratios go up substantially at the 254 00:13:07,120 --> 00:13:11,100 Speaker 1: sovereign level in many emerging-market countries and of course substantially 255 00:13:11,100 --> 00:13:14,199 Speaker 1: in developed markets as well. So the world's indebtedness is 256 00:13:14,200 --> 00:13:14,780 Speaker 1: significa 257 00:13:14,790 --> 00:13:18,460 Speaker 1: greater today than a couple of years ago. You're advocating 258 00:13:18,460 --> 00:13:22,920 Speaker 1: some degree of rationalization of fiscal positions. But go back 259 00:13:22,920 --> 00:13:25,270 Speaker 1: to my earlier point of interest rates going up in 260 00:13:25,270 --> 00:13:27,550 Speaker 1: real terms this year. Does that worry you that maybe 261 00:13:27,550 --> 00:13:30,770 Speaker 1: our absorptive capacity is not that much given that how 262 00:13:30,770 --> 00:13:33,210 Speaker 1: much debt we have added in the last couple of years? 263 00:13:33,980 --> 00:13:36,970 Speaker 2: Yeah, I think, I mean, in fact, I would say 264 00:13:36,980 --> 00:13:40,740 Speaker 2: uh I think that has gone up across many regions 265 00:13:40,740 --> 00:13:43,459 Speaker 2: of the world, but particularly so in Asia. Right. I 266 00:13:43,460 --> 00:13:45,960 Speaker 2: think if I remember the right numbers, I think it's 267 00:13:45,960 --> 00:13:50,089 Speaker 2: gone from 25% to 38%. That's a big increase in debt. 268 00:13:50,100 --> 00:13:53,720 Speaker 2: And and and you know, our advice to countries as 269 00:13:53,730 --> 00:13:56,339 Speaker 2: both in the near term, you have to provide support 270 00:13:56,350 --> 00:14:00,010 Speaker 2: but provide targeted support to the poor and vulnerable, but 271 00:14:00,020 --> 00:14:02,110 Speaker 2: over the period over the medium term many of these 272 00:14:02,110 --> 00:14:02,750 Speaker 2: countries have 273 00:14:02,765 --> 00:14:07,835 Speaker 2: embark on fiscal consolidation, which not just because you have 274 00:14:07,845 --> 00:14:11,155 Speaker 2: use of a lot of physical space addressing the pandemic 275 00:14:11,155 --> 00:14:13,074 Speaker 2: in the war and so on, but you have longer 276 00:14:13,075 --> 00:14:16,855 Speaker 2: term challenges in terms of aging population, climate and so on. 277 00:14:16,865 --> 00:14:20,325 Speaker 2: So the fiscal stance for a lot of countries in 278 00:14:20,325 --> 00:14:24,215 Speaker 2: Asia has to be towards greater consolidation both in the 279 00:14:24,215 --> 00:14:26,645 Speaker 2: near term but targeted support to the poor and vulnerable, 280 00:14:26,645 --> 00:14:29,585 Speaker 2: but over the medium term a lot more. I think 281 00:14:29,585 --> 00:14:31,535 Speaker 2: I would say that many countries in the region 282 00:14:31,690 --> 00:14:32,310 Speaker 2: would 283 00:14:32,310 --> 00:14:33,380 Speaker 1: would need that 284 00:14:33,420 --> 00:14:35,640 Speaker 2: and and and so that is going to have an 285 00:14:35,640 --> 00:14:40,000 Speaker 2: impact on you no longer term prospects, growth moderation. So on. 286 00:14:40,620 --> 00:14:43,130 Speaker 1: Later in this podcast, I'd like to do some country 287 00:14:43,130 --> 00:14:45,530 Speaker 1: by country overview with you And at that time I'd 288 00:14:45,530 --> 00:14:47,270 Speaker 1: like to bring back the dead issue, especially in the 289 00:14:47,270 --> 00:14:51,109 Speaker 1: context of Japan and china. But before we were there, Krishna, 290 00:14:51,120 --> 00:14:54,989 Speaker 1: you have to rather high profile program cases right now 291 00:14:55,000 --> 00:14:58,740 Speaker 1: Bangladesh and Sri Lanka. Uh let's talk about those programs 292 00:14:58,740 --> 00:14:59,360 Speaker 1: a little bit. 293 00:14:59,810 --> 00:15:04,500 Speaker 2: So, so Bangladesh, we just approved a program for Bangladesh 294 00:15:04,500 --> 00:15:07,220 Speaker 2: which is a, is a, I think it's an E 295 00:15:07,220 --> 00:15:10,680 Speaker 2: C F E F F uh for I want to 296 00:15:10,680 --> 00:15:14,610 Speaker 2: get the exact numbers right about 3.3 billion for Bangladesh, 297 00:15:14,620 --> 00:15:17,210 Speaker 2: which is, you know, as you know, time or you've 298 00:15:17,210 --> 00:15:20,270 Speaker 2: been in the fund. It's what we call as a 299 00:15:20,280 --> 00:15:23,110 Speaker 2: full fund supported program at U C. D. Program on 300 00:15:23,110 --> 00:15:24,740 Speaker 2: top of that. We also have provide 301 00:15:25,050 --> 00:15:29,680 Speaker 2: Bangladesh is called R. S. D, which from which we 302 00:15:29,680 --> 00:15:34,840 Speaker 2: have 1.4 billion to support Bangladesh economic policies. Again, I 303 00:15:34,850 --> 00:15:39,360 Speaker 2: must give credit to Bangladesh. They saw they were like 304 00:15:39,360 --> 00:15:42,780 Speaker 2: many other countries in the region, many, many other emerging markets, 305 00:15:42,790 --> 00:15:46,040 Speaker 2: they were affected by the back to back crisis, the 306 00:15:46,040 --> 00:15:48,770 Speaker 2: pandemic and the war and so on. So they did 307 00:15:48,770 --> 00:15:49,690 Speaker 2: take a huge terms, 308 00:15:49,710 --> 00:15:55,830 Speaker 2: great shock which had a bearing on their macro stability growth, 309 00:15:55,840 --> 00:15:59,550 Speaker 2: excellent pressure and so on. So they saw this coming 310 00:15:59,550 --> 00:16:02,040 Speaker 2: and so they were proactive in reaching out to us 311 00:16:02,040 --> 00:16:05,720 Speaker 2: for a program to stabilize the economy to have durable 312 00:16:05,720 --> 00:16:09,050 Speaker 2: growth and at the small longer term structural reforms at 313 00:16:09,050 --> 00:16:12,680 Speaker 2: the same time, the Bangladesh one country which is hugely 314 00:16:12,680 --> 00:16:14,000 Speaker 2: affected by climate 315 00:16:14,000 --> 00:16:14,660 Speaker 1: change 316 00:16:15,160 --> 00:16:18,830 Speaker 2: and they were the first country to ask for support 317 00:16:18,840 --> 00:16:22,460 Speaker 2: under the resilience and Sustainable Trust, which is a new 318 00:16:22,460 --> 00:16:26,340 Speaker 2: instrument from the fund. It's a long long term instrument 319 00:16:26,350 --> 00:16:30,520 Speaker 2: right now. It's aimed at addressing climate change and pandemic preparedness. 320 00:16:30,530 --> 00:16:33,880 Speaker 2: So in some sense, Bangladesh is trying to address both 321 00:16:34,420 --> 00:16:34,950 Speaker 1: the near 322 00:16:34,950 --> 00:16:39,160 Speaker 2: term problems and longer term challenges. And you know, some 323 00:16:39,160 --> 00:16:41,370 Speaker 2: somewhere in between. You also have these medium term challenge. 324 00:16:41,370 --> 00:16:44,440 Speaker 2: So this is a program which addresses both the near 325 00:16:44,440 --> 00:16:47,830 Speaker 2: term and the longer term challenges. And the idea here 326 00:16:47,830 --> 00:16:50,950 Speaker 2: is in addition, I mean, you know, this very well 327 00:16:50,960 --> 00:16:53,800 Speaker 2: that the IMF's role is more of a catalytic credit 328 00:16:53,810 --> 00:16:56,520 Speaker 2: right? So the I. M. F. Comes in, you have 329 00:16:56,530 --> 00:16:59,040 Speaker 2: other creditors like the A. D. B. The world man 330 00:16:59,040 --> 00:17:03,520 Speaker 2: coming in. So it provides Bangladesh with with sufficient resources 331 00:17:03,520 --> 00:17:06,659 Speaker 2: to address the challenges they're facing right now, both in 332 00:17:06,660 --> 00:17:10,280 Speaker 2: terms of macro stability and you know, anchoring strong and 333 00:17:10,280 --> 00:17:13,189 Speaker 2: durable growth and addressing longer term challenges 334 00:17:13,780 --> 00:17:15,850 Speaker 1: chris before we go to Sri Lanka, just a couple 335 00:17:15,850 --> 00:17:20,760 Speaker 1: of follow ups so different funds traditional balance of payments 336 00:17:20,760 --> 00:17:23,669 Speaker 1: support as well as this new resilience and 337 00:17:23,790 --> 00:17:28,060 Speaker 1: sustainability trust. But the conditionalities under the program are the 338 00:17:28,060 --> 00:17:32,440 Speaker 1: same that the disbursement from these different financing facilities would 339 00:17:32,440 --> 00:17:34,570 Speaker 1: be subject to the same sort of conditionalities or would 340 00:17:34,570 --> 00:17:38,020 Speaker 1: it be like different disbursement schedule and requirements. So 341 00:17:38,020 --> 00:17:40,190 Speaker 2: the conditionality will is right for the for the U. C. T. 342 00:17:40,190 --> 00:17:42,949 Speaker 2: Program which is a traditional fund program, you would have 343 00:17:42,950 --> 00:17:46,729 Speaker 2: conditionality which links to what's been the underlying cause of 344 00:17:46,730 --> 00:17:47,760 Speaker 2: the problem. Right. So 345 00:17:47,780 --> 00:17:50,390 Speaker 2: there is a problem, there is a B. O. P problem. 346 00:17:50,390 --> 00:17:52,660 Speaker 2: What is the underlying cause if it's a fiscal, let's 347 00:17:52,660 --> 00:17:56,610 Speaker 2: address the fiscal challenges and so trying to address the 348 00:17:56,609 --> 00:18:00,630 Speaker 2: whole issue of mobilizing revenue scaling up social spending because 349 00:18:00,630 --> 00:18:02,990 Speaker 2: you also want to protect the poor and vulnerable. So 350 00:18:02,990 --> 00:18:04,830 Speaker 2: in many of these countries and many of these programs 351 00:18:04,830 --> 00:18:08,530 Speaker 2: now we have exclusive conditionality on scaling up social spending. 352 00:18:08,530 --> 00:18:10,790 Speaker 2: So you have something similar to that in the program 353 00:18:10,800 --> 00:18:11,750 Speaker 2: and then, you know, 354 00:18:11,770 --> 00:18:14,810 Speaker 2: modernizing the monetary frameworks, all these are what you would 355 00:18:14,810 --> 00:18:18,879 Speaker 2: think as quintessential policies which underpinned of U. C. D. 356 00:18:18,880 --> 00:18:24,760 Speaker 2: Program but also now you have the RSC will be 357 00:18:24,770 --> 00:18:29,220 Speaker 2: geared towards putting in place policies which can alleviate, you know, 358 00:18:29,220 --> 00:18:33,840 Speaker 2: climate challenges which will also help bring in climate finance. 359 00:18:33,840 --> 00:18:35,740 Speaker 2: So the conditionality 360 00:18:35,760 --> 00:18:38,450 Speaker 2: ways across these things. But one is more in terms 361 00:18:38,460 --> 00:18:42,070 Speaker 2: of addressing the climate challenges of the pandemic preparedness depending 362 00:18:42,070 --> 00:18:45,169 Speaker 2: on which country looking at. And so and so the 363 00:18:45,180 --> 00:18:48,580 Speaker 2: conditionality is slightly different in the second for the RSC thing, 364 00:18:48,580 --> 00:18:51,899 Speaker 2: it's more geared towards addressing the climate challenge, getting climate 365 00:18:51,900 --> 00:18:55,340 Speaker 2: financing into the country, you know, regulatory policy, which would 366 00:18:55,350 --> 00:18:58,500 Speaker 2: things which would actually entice the privacy coming. So that's 367 00:18:58,500 --> 00:18:59,750 Speaker 2: the slight difference there. 368 00:19:00,240 --> 00:19:04,380 Speaker 1: So, could one program go off track and the trust 369 00:19:04,380 --> 00:19:06,920 Speaker 1: fund related disbursements continue? 370 00:19:07,700 --> 00:19:10,740 Speaker 2: Well, it depends upon what we mean by going going 371 00:19:10,740 --> 00:19:13,550 Speaker 2: off track. So, you know, as you know, time or 372 00:19:13,550 --> 00:19:15,859 Speaker 2: in many cases there are some things which go off track, 373 00:19:15,859 --> 00:19:17,770 Speaker 2: some things which can be brought back. So I think 374 00:19:17,770 --> 00:19:20,630 Speaker 2: there is enough flexibility in the program to make sure 375 00:19:20,630 --> 00:19:20,820 Speaker 2: that they 376 00:19:20,820 --> 00:19:21,800 Speaker 1: work together. 377 00:19:21,810 --> 00:19:22,720 Speaker 2: But 378 00:19:22,730 --> 00:19:25,909 Speaker 2: uh maybe I should at this point talk about the RST. 379 00:19:25,920 --> 00:19:29,590 Speaker 2: The RST is uh the third pillar of learning in 380 00:19:29,590 --> 00:19:31,120 Speaker 2: the I. M. F. Right. You know, as you know, 381 00:19:31,119 --> 00:19:35,240 Speaker 2: we have the the gender resources account which provides financing 382 00:19:35,240 --> 00:19:36,990 Speaker 2: to all, you 383 00:19:36,990 --> 00:19:37,760 Speaker 1: know, 384 00:19:38,230 --> 00:19:41,850 Speaker 2: develop, non developing or developed countries and emerging markets so on. 385 00:19:41,859 --> 00:19:45,090 Speaker 2: Then you have the prgf which provides financing to the 386 00:19:45,100 --> 00:19:48,570 Speaker 2: low income developing countries. Now you have the RST which 387 00:19:48,570 --> 00:19:51,490 Speaker 2: is the third pillar which provides longer term financing, It's 388 00:19:51,490 --> 00:19:54,649 Speaker 2: a 20 year instrument with a 10.5 years grace addressed 389 00:19:54,650 --> 00:19:56,439 Speaker 2: towards pandemic preparedness 390 00:19:56,460 --> 00:20:00,639 Speaker 2: and climate change. So it's in that context we have 391 00:20:00,640 --> 00:20:04,950 Speaker 2: sufficient flexibility to ensure that the programs go together. Bangladesh 392 00:20:04,950 --> 00:20:08,399 Speaker 2: is the first country which is asked for a program 393 00:20:08,400 --> 00:20:11,060 Speaker 2: under the R. S. D. All the other programs which 394 00:20:11,070 --> 00:20:14,090 Speaker 2: which have gotten resources of the RSC have been top 395 00:20:14,090 --> 00:20:15,360 Speaker 1: ups. So 396 00:20:15,359 --> 00:20:18,690 Speaker 2: Bangladesh first one which is getting a pro U. C. D. 397 00:20:18,690 --> 00:20:20,340 Speaker 2: Program with the RST 398 00:20:21,380 --> 00:20:26,740 Speaker 1: um in the last two decades, Krishna most crisis globally 399 00:20:26,740 --> 00:20:29,350 Speaker 1: at least have come from the financial sector. So this 400 00:20:29,359 --> 00:20:33,660 Speaker 1: intersection between financial stability and economic stability seems to become 401 00:20:33,660 --> 00:20:36,710 Speaker 1: more and more pronounced as the world gets more financial ized. 402 00:20:36,920 --> 00:20:40,840 Speaker 1: Um So in countries like Bangladesh or even Sri Lanka 403 00:20:40,840 --> 00:20:42,010 Speaker 1: and I would like to talk to you about Sri 404 00:20:42,010 --> 00:20:46,170 Speaker 1: Lanka momentarily where you know, they're not exactly advanced economies 405 00:20:46,170 --> 00:20:49,010 Speaker 1: in terms of financial market depth or you know, spillovers 406 00:20:49,010 --> 00:20:51,700 Speaker 1: to the rest of the world, but it still matters, 407 00:20:51,700 --> 00:20:52,670 Speaker 1: you know, dollar liquidity 408 00:20:52,690 --> 00:20:56,460 Speaker 1: and external funding and stuff like that. Um So what's 409 00:20:56,460 --> 00:20:59,340 Speaker 1: your sense of financial stability in Bangladesh? Because my understanding 410 00:20:59,340 --> 00:21:01,460 Speaker 1: is their currency has taken quite a bit of a 411 00:21:01,460 --> 00:21:04,010 Speaker 1: knock over the last year because of adverse terms of 412 00:21:04,010 --> 00:21:06,820 Speaker 1: trade effect. And there are questions about, you know like 413 00:21:06,830 --> 00:21:08,450 Speaker 1: the reserve adequacy and so on. 414 00:21:09,290 --> 00:21:11,920 Speaker 2: So again when we look at the program there, right, 415 00:21:11,920 --> 00:21:15,130 Speaker 2: so we look at what's happened to the balance of payment, 416 00:21:15,130 --> 00:21:18,720 Speaker 2: what happened to the exchange rate, What's happened to, you know, 417 00:21:18,730 --> 00:21:21,510 Speaker 2: many of these countries, again, not specific, they could have 418 00:21:21,510 --> 00:21:25,909 Speaker 2: leverage in various sector balance sheets. So the whole idea 419 00:21:25,910 --> 00:21:28,840 Speaker 2: here to see what does all of this mean for 420 00:21:28,840 --> 00:21:32,430 Speaker 2: financial sector stability. So one part of a program also 421 00:21:32,430 --> 00:21:34,880 Speaker 2: focuses on strengthening the financial sector both 422 00:21:34,890 --> 00:21:37,920 Speaker 2: through, you know, whether they have sufficient amount of capital, 423 00:21:37,920 --> 00:21:41,440 Speaker 2: Where do you have any uh any any shortcomings? So 424 00:21:41,450 --> 00:21:45,790 Speaker 2: our programs also geared towards addressing the financial sector stability park. 425 00:21:45,800 --> 00:21:50,080 Speaker 2: And that's true for both uh Bangladesh and Sri Lanka. 426 00:21:50,080 --> 00:21:54,119 Speaker 2: In fact, I think one aspect of Asia in general 427 00:21:54,140 --> 00:21:56,820 Speaker 2: is that there is quite a big feedback loop between 428 00:21:56,820 --> 00:22:00,470 Speaker 2: the sovereign and the banks. So in countries 429 00:22:00,480 --> 00:22:04,010 Speaker 2: where we don't have programs, we're actually strengthening our surveillance 430 00:22:04,010 --> 00:22:07,810 Speaker 2: and look at that part of systemic risk is leverage 431 00:22:07,820 --> 00:22:11,430 Speaker 2: in the corporate sector, all the banks, all the households, 432 00:22:11,440 --> 00:22:14,940 Speaker 2: how does that bear upon, you know, economic prospects? So 433 00:22:14,950 --> 00:22:17,919 Speaker 2: in many countries are looking to see if house prices 434 00:22:17,920 --> 00:22:20,590 Speaker 2: are correcting right? And a lot of and there is 435 00:22:20,590 --> 00:22:24,580 Speaker 2: large amount of household debt. What does it mean for 436 00:22:24,580 --> 00:22:26,060 Speaker 2: financial stability? What does it mean 437 00:22:26,070 --> 00:22:28,610 Speaker 2: for economic stability? So that's in the context of surveillance 438 00:22:28,619 --> 00:22:31,060 Speaker 2: in the context of programs, you actually can address that 439 00:22:31,060 --> 00:22:34,949 Speaker 2: more proactively by saying that you have this problem, address 440 00:22:34,950 --> 00:22:36,820 Speaker 2: the gap in your balance sheet and so on. So 441 00:22:36,820 --> 00:22:39,940 Speaker 2: that's a very interesting part of all our programs, both 442 00:22:39,940 --> 00:22:43,040 Speaker 2: Bangladesh and Sri Lanka to make sure that it is 443 00:22:43,040 --> 00:22:46,300 Speaker 2: not just focused on growth and the B O P 444 00:22:46,310 --> 00:22:48,010 Speaker 2: but also and the and the fiscal but also the 445 00:22:48,010 --> 00:22:50,840 Speaker 2: financial sector is heart and center of how we monitor 446 00:22:50,850 --> 00:22:51,660 Speaker 2: the country. 447 00:22:52,300 --> 00:22:54,150 Speaker 1: Okay, let's talk about Sri Lanka. 448 00:22:55,330 --> 00:22:59,230 Speaker 2: Yeah, so Sri Lanka is is facing a single economic crisis. 449 00:22:59,240 --> 00:23:03,400 Speaker 2: We are deeply were deeply concerned with what's happening impact 450 00:23:03,400 --> 00:23:07,300 Speaker 2: of the economic crisis on the people. We've seen social 451 00:23:07,300 --> 00:23:10,660 Speaker 2: aggressive all seen it in last summer. Right? And on 452 00:23:10,660 --> 00:23:14,410 Speaker 2: september one of 2022 we reached a staff level agreement 453 00:23:14,420 --> 00:23:18,810 Speaker 2: with Sri Lanka on a 48 month arrangement under the 454 00:23:18,820 --> 00:23:21,070 Speaker 2: excellent fund facility. And so this is 455 00:23:21,070 --> 00:23:22,200 Speaker 1: about 456 00:23:22,210 --> 00:23:23,170 Speaker 2: about three billion. 457 00:23:23,180 --> 00:23:23,710 Speaker 1: Right? 458 00:23:24,330 --> 00:23:28,180 Speaker 2: And the reform is built on very strong policy measures 459 00:23:28,180 --> 00:23:33,780 Speaker 2: addressed at raising government revenue to ensure fiscal sustainability, introducing 460 00:23:33,780 --> 00:23:39,170 Speaker 2: cost recovery, energy pricing, restoring price stability, by modernizing the 461 00:23:39,180 --> 00:23:43,600 Speaker 2: monetary framework, rebuilding from reserves, safeguarding financial stability, which I 462 00:23:43,600 --> 00:23:46,910 Speaker 2: talked about and strengthening the social safety nets because in 463 00:23:46,910 --> 00:23:48,900 Speaker 2: every program time or we are trying to 464 00:23:48,920 --> 00:23:53,850 Speaker 2: ensure that the poor and vulnerable, get our address are 465 00:23:53,850 --> 00:23:57,040 Speaker 2: taken care of because some of these programs do do 466 00:23:57,040 --> 00:23:57,980 Speaker 1: involve 467 00:23:57,990 --> 00:24:00,869 Speaker 2: conditions which can be hard. So we want to make 468 00:24:00,869 --> 00:24:03,369 Speaker 2: sure that the poor and vulnerable protected and we also 469 00:24:03,369 --> 00:24:05,940 Speaker 2: want to look at corruption and governance and so on. 470 00:24:05,950 --> 00:24:09,540 Speaker 2: So this program in Sri Lanka is is what we would, 471 00:24:09,550 --> 00:24:12,110 Speaker 2: I would call a full enchilada. And since it had 472 00:24:12,109 --> 00:24:13,510 Speaker 2: covers many aspects of it, 473 00:24:14,130 --> 00:24:18,629 Speaker 2: the problem there is as you know, sri Lanka's debt 474 00:24:18,630 --> 00:24:19,660 Speaker 2: and sustainable. 475 00:24:19,670 --> 00:24:20,310 Speaker 1: So for the 476 00:24:20,310 --> 00:24:23,080 Speaker 2: fund to lend the executive board of the I. M. F. 477 00:24:23,080 --> 00:24:25,600 Speaker 2: To approve a program, the debt has to be, has 478 00:24:25,600 --> 00:24:28,400 Speaker 2: to be made sustainable. So we are at that point 479 00:24:28,400 --> 00:24:30,450 Speaker 2: where uh 480 00:24:30,920 --> 00:24:31,170 Speaker 1: we 481 00:24:31,170 --> 00:24:34,310 Speaker 2: are trying to get assurances from bilateral creditors, making sure 482 00:24:34,310 --> 00:24:36,439 Speaker 2: that Sri Lanka is making good fit for those private 483 00:24:36,440 --> 00:24:37,380 Speaker 2: creditors so 484 00:24:37,380 --> 00:24:38,750 Speaker 1: that debt can 485 00:24:38,750 --> 00:24:41,620 Speaker 2: be made sustainable a forward looking basis. So once that 486 00:24:41,619 --> 00:24:44,030 Speaker 2: is assured, we can go to the board with the 487 00:24:44,030 --> 00:24:46,430 Speaker 2: program for for Sri Lanka, but that's where we are 488 00:24:46,430 --> 00:24:47,030 Speaker 2: right now. 489 00:24:47,700 --> 00:24:53,189 Speaker 1: Um now in the past for really, you know, heavily 490 00:24:53,190 --> 00:24:56,859 Speaker 1: indebted countries, there have been initiatives like the Hipc initiative, 491 00:24:56,859 --> 00:25:00,639 Speaker 1: heavily indebted countries initiatives, there have been paris club and 492 00:25:00,640 --> 00:25:05,129 Speaker 1: so on. Um the sort of sovereign debt balance of 493 00:25:05,130 --> 00:25:08,500 Speaker 1: payments crisis that we have seen not just in your a. P. D. Countries, 494 00:25:08,500 --> 00:25:10,320 Speaker 1: but elsewhere over the last few years, 495 00:25:10,720 --> 00:25:14,000 Speaker 1: is there scope for sort of a multilateral round table, 496 00:25:14,000 --> 00:25:16,540 Speaker 1: like a paris club to deal with these things? Or 497 00:25:16,540 --> 00:25:18,229 Speaker 1: life is a little more complicated. There are a lot 498 00:25:18,230 --> 00:25:22,840 Speaker 1: of bilateral aspects which simply doesn't lend themselves to multilateral approaches. 499 00:25:23,609 --> 00:25:27,659 Speaker 2: So, so you're you're familiar with the common framework, the 500 00:25:27,660 --> 00:25:29,900 Speaker 2: common framework has been put in place for the low 501 00:25:29,900 --> 00:25:33,659 Speaker 2: income countries where they can come to the use the 502 00:25:33,660 --> 00:25:35,640 Speaker 2: common framework to resolve the debt situation. 503 00:25:36,130 --> 00:25:39,619 Speaker 2: The unfortunately comfort does not apply to a country like 504 00:25:39,619 --> 00:25:41,960 Speaker 2: Sri Lanka, it's a middle income country. So we have 505 00:25:41,960 --> 00:25:43,490 Speaker 2: to think in terms of what could be the right 506 00:25:43,490 --> 00:25:46,109 Speaker 2: kind of framework. Now you did talk about, you touched 507 00:25:46,109 --> 00:25:49,680 Speaker 2: upon 11 particular aspect. I mean the world has evolved 508 00:25:49,680 --> 00:25:52,570 Speaker 2: a lot since hip flick and so on and so forth. 509 00:25:52,570 --> 00:25:55,899 Speaker 2: Right now we have, we have countries which have which 510 00:25:55,900 --> 00:25:59,840 Speaker 2: have debt to private creditors. They have debt, bilateral creditors, 511 00:25:59,850 --> 00:26:01,629 Speaker 2: some of whom are in the paris club, some of 512 00:26:01,630 --> 00:26:04,180 Speaker 2: whom are non paris club and then you have of 513 00:26:04,180 --> 00:26:05,400 Speaker 2: course the MdGS and so 514 00:26:05,400 --> 00:26:05,920 Speaker 1: on. 515 00:26:06,440 --> 00:26:09,750 Speaker 2: So when you talk about debt restructuring, the complication hits 516 00:26:09,750 --> 00:26:12,669 Speaker 2: is how do you coordinate the paris club creditors, the 517 00:26:12,670 --> 00:26:15,430 Speaker 2: non paris club creditors and that's the kind of issue 518 00:26:15,430 --> 00:26:18,040 Speaker 2: you deal with dealing with in many countries. So at 519 00:26:18,040 --> 00:26:20,710 Speaker 2: this point in time, we are working within the frameworks, 520 00:26:20,710 --> 00:26:24,340 Speaker 2: we have the common common framework for follow income countries 521 00:26:24,350 --> 00:26:26,850 Speaker 2: which of course there are efforts to make it more efficient, 522 00:26:26,850 --> 00:26:29,000 Speaker 2: more expeditious and so 523 00:26:29,020 --> 00:26:31,280 Speaker 2: so on. But also we have to think in terms 524 00:26:31,280 --> 00:26:33,850 Speaker 2: of the frameworks we have in place to resolve debt 525 00:26:33,850 --> 00:26:37,810 Speaker 2: restructuring the debt problems, facebook contradicts sri Lanka. So we 526 00:26:37,810 --> 00:26:39,790 Speaker 2: are working with that in the case of Sri Lanka, 527 00:26:39,790 --> 00:26:43,119 Speaker 2: we have all the credits can think of private creditors, 528 00:26:43,130 --> 00:26:48,020 Speaker 2: uh paris club creditors, non paris club creditors, Mdgs domestic credit, 529 00:26:48,020 --> 00:26:50,419 Speaker 2: so many many creditors at play here. So we are 530 00:26:50,420 --> 00:26:51,580 Speaker 2: trying to, 531 00:26:51,590 --> 00:26:53,900 Speaker 2: again, the fund cannot get in the world and debt 532 00:26:53,900 --> 00:26:57,619 Speaker 2: researching process itself. What it does is it provides the 533 00:26:57,619 --> 00:27:01,590 Speaker 2: overall macro framework, looks at what is the debt target, 534 00:27:01,590 --> 00:27:05,210 Speaker 2: which which can lead you to sustain body and so on. 535 00:27:05,220 --> 00:27:09,070 Speaker 2: And that provides the framework for the, for the debtor country. 536 00:27:09,070 --> 00:27:11,689 Speaker 2: In this case, Sri Lanka to negotiate with its creators. 537 00:27:11,700 --> 00:27:14,169 Speaker 2: So that's where we are in Austria Lanka 538 00:27:14,859 --> 00:27:18,090 Speaker 1: very, very interesting. So just to be clear, the fund 539 00:27:18,090 --> 00:27:23,510 Speaker 1: remains the lead agency as far as the sustainability analysis, 540 00:27:23,510 --> 00:27:28,340 Speaker 1: the arithmetic of sustainability, that sort of forecasts and analysis 541 00:27:28,340 --> 00:27:30,630 Speaker 1: and scenarios are prepared by the I. M f. When 542 00:27:30,630 --> 00:27:32,860 Speaker 1: these sort of multilateral discussions are taking me today 543 00:27:33,020 --> 00:27:34,060 Speaker 1: are taking place. 544 00:27:34,070 --> 00:27:36,629 Speaker 2: I think it is one area where we have a 545 00:27:36,640 --> 00:27:41,010 Speaker 2: real competitive advantage is our necessary frameworks are very, a 546 00:27:41,020 --> 00:27:43,459 Speaker 2: very modern state of the art. So we have a 547 00:27:43,460 --> 00:27:47,229 Speaker 2: good way to, to analyze the country's debt situation to 548 00:27:47,230 --> 00:27:50,880 Speaker 2: see when a debt problem is sustainable. When it is 549 00:27:50,880 --> 00:27:55,290 Speaker 2: not often times people will, will, you know, it's not 550 00:27:55,290 --> 00:27:58,340 Speaker 2: very obvious the common person, why do we judge one 551 00:27:58,340 --> 00:28:00,510 Speaker 2: country is yet to be sustainable and not the other one. 552 00:28:00,520 --> 00:28:00,950 Speaker 2: But we, 553 00:28:00,970 --> 00:28:04,570 Speaker 2: these frameworks which are very sophisticated, which kind of tell you, okay, 554 00:28:04,570 --> 00:28:07,230 Speaker 2: right now, you may not be sustainable. That is unsustainable, 555 00:28:07,240 --> 00:28:10,220 Speaker 2: what needs to be done going forward. So that's where 556 00:28:10,230 --> 00:28:14,540 Speaker 2: the kind of the fund has the expertise to say, 557 00:28:14,540 --> 00:28:17,190 Speaker 2: what are the parameters which can get you to a 558 00:28:17,190 --> 00:28:20,439 Speaker 2: sustainable level of debt. And like, like I mentioned before, 559 00:28:20,450 --> 00:28:23,250 Speaker 2: the I m f cannot lend to an unsustainable debt situation. 560 00:28:23,260 --> 00:28:25,450 Speaker 2: So we wait for the debt to be made sustainable 561 00:28:25,460 --> 00:28:28,100 Speaker 2: on a forward looking basis before we go ahead and 562 00:28:28,100 --> 00:28:28,919 Speaker 2: lend money to them. 563 00:28:29,619 --> 00:28:34,140 Speaker 1: Uh That is very well understood and appreciated that in 564 00:28:34,140 --> 00:28:38,150 Speaker 1: terms of, you know, fiscal parameters and debt sustainability, the 565 00:28:38,150 --> 00:28:41,460 Speaker 1: analytical framework that the fund has developed. Those tools remain 566 00:28:41,460 --> 00:28:44,920 Speaker 1: best practice. Now, we were talking about the Brazilian C 567 00:28:44,930 --> 00:28:49,590 Speaker 1: resilience and sustainability trust. Earlier, uh as sort of we 568 00:28:49,590 --> 00:28:53,290 Speaker 1: go forward, climate change related work is going to become 569 00:28:53,290 --> 00:28:55,260 Speaker 1: more and more integral to your day to day order. 570 00:28:55,270 --> 00:28:59,280 Speaker 1: Uh So what kind of best practices and analytical tools 571 00:28:59,280 --> 00:29:00,230 Speaker 1: will you be using? 572 00:29:01,400 --> 00:29:05,200 Speaker 2: So, again, that's a very good question at time. Also, 573 00:29:05,210 --> 00:29:07,870 Speaker 2: the RST kind of provides 574 00:29:07,870 --> 00:29:08,590 Speaker 1: you, 575 00:29:08,600 --> 00:29:12,130 Speaker 2: you can think in terms of uh 576 00:29:12,320 --> 00:29:16,200 Speaker 2: a macro fiscal climate framework, which kind of internalizes the 577 00:29:16,200 --> 00:29:20,610 Speaker 2: climate risks. The country has into a into a into 578 00:29:20,610 --> 00:29:24,320 Speaker 2: a into a traditional macro framework used in the past. 579 00:29:24,320 --> 00:29:26,680 Speaker 2: All right, So, now, what we're doing is we are 580 00:29:26,680 --> 00:29:30,880 Speaker 2: trying to integrate climate risks into our macro framework. We 581 00:29:30,880 --> 00:29:33,080 Speaker 2: are trying to analyze, we're trying to integrate climate 582 00:29:33,090 --> 00:29:36,400 Speaker 2: risk assessment of financial sector stability for banks and so 583 00:29:36,400 --> 00:29:39,030 Speaker 2: on in the context of our, you know, f you know, 584 00:29:39,030 --> 00:29:42,540 Speaker 2: the financial sector assessment programs we have so, in every 585 00:29:42,540 --> 00:29:44,340 Speaker 2: sense of the world, we're trying to bring in climate 586 00:29:44,350 --> 00:29:48,340 Speaker 2: risk explicitly into our analysis, both whether the macro or 587 00:29:48,340 --> 00:29:51,870 Speaker 2: the financial right, and in the case, in the context 588 00:29:51,870 --> 00:29:53,850 Speaker 2: of countries which which seek out 589 00:29:53,870 --> 00:29:59,920 Speaker 2: support from the RSV, that framework provides you the kind 590 00:29:59,920 --> 00:30:01,780 Speaker 2: of credibility you need to also 591 00:30:01,780 --> 00:30:02,800 Speaker 1: catalyze 592 00:30:02,810 --> 00:30:05,910 Speaker 2: financing from the private sector. I mean, everybody recognizes the 593 00:30:05,910 --> 00:30:10,040 Speaker 2: fact that addressing the challenge of climate, the Climate change, 594 00:30:10,050 --> 00:30:13,820 Speaker 2: Climate change challenge would require huge amounts of private sector 595 00:30:13,820 --> 00:30:14,630 Speaker 2: money coming in 596 00:30:14,840 --> 00:30:17,000 Speaker 2: the public sector on its own cannot do it. So, 597 00:30:17,000 --> 00:30:19,970 Speaker 2: the question is, can you think, in terms of a 598 00:30:19,970 --> 00:30:24,040 Speaker 2: framework which can which is credible, which the private sector 599 00:30:24,040 --> 00:30:26,870 Speaker 2: finds credible and realistic, so that they can come in 600 00:30:26,880 --> 00:30:29,240 Speaker 2: and what are the kind of reforms you can address 601 00:30:29,250 --> 00:30:34,520 Speaker 2: in that framework which entices the which allows the the 602 00:30:34,520 --> 00:30:36,680 Speaker 2: private sector to come? So, that's the kind of analysis 603 00:30:36,680 --> 00:30:38,570 Speaker 2: we're doing, integrating climate 604 00:30:38,570 --> 00:30:39,130 Speaker 1: risks, 605 00:30:39,540 --> 00:30:41,840 Speaker 2: looking at what keeps the private sector away, what can 606 00:30:41,840 --> 00:30:45,570 Speaker 2: be done to alleviate that? And and in some sense, 607 00:30:45,570 --> 00:30:49,930 Speaker 2: I create the kind of enabling environment for the private 608 00:30:49,930 --> 00:30:52,770 Speaker 2: sector to come along with climate funds along with, you know, 609 00:30:52,770 --> 00:30:54,910 Speaker 2: the other i f i s to help a country 610 00:30:54,920 --> 00:30:57,860 Speaker 2: address the challenge of climate change? 611 00:30:58,710 --> 00:31:01,450 Speaker 1: Great good to hear all that we here at PBS 612 00:31:01,450 --> 00:31:05,760 Speaker 1: also remain very passionately involved in some of these issues 613 00:31:05,770 --> 00:31:08,660 Speaker 2: uh has been at the forefront of this and you 614 00:31:08,660 --> 00:31:10,820 Speaker 2: guys also have been the forefront of this. In fact 615 00:31:10,830 --> 00:31:14,090 Speaker 2: there is work ongoing at the fund on trying to, 616 00:31:14,100 --> 00:31:16,300 Speaker 2: you know, work with the privacy to see how 617 00:31:16,310 --> 00:31:17,060 Speaker 1: we could bring in 618 00:31:17,070 --> 00:31:20,400 Speaker 2: private sector to address the climate challenge, 619 00:31:20,420 --> 00:31:21,860 Speaker 2: climate change challenge, 620 00:31:21,880 --> 00:31:23,810 Speaker 1: Right, you may not be aware of this, but I'm 621 00:31:23,810 --> 00:31:25,540 Speaker 1: actually working with some of your staff on this issue 622 00:31:25,540 --> 00:31:30,200 Speaker 1: to you, you're working for one of these days, Krishna, 623 00:31:30,210 --> 00:31:33,420 Speaker 1: you cover 37 countries in your department. I would love 624 00:31:33,420 --> 00:31:36,150 Speaker 1: to talk about all of them, but simply not possible. 625 00:31:36,150 --> 00:31:39,200 Speaker 1: So I have chosen a list of five countries that 626 00:31:39,200 --> 00:31:40,980 Speaker 1: I'd like to discuss with you and maybe we can 627 00:31:40,980 --> 00:31:42,120 Speaker 1: go one by one. 628 00:31:42,330 --> 00:31:45,790 Speaker 1: Uh Japan used to be boring and has become very 629 00:31:45,790 --> 00:31:48,970 Speaker 1: exciting in the last few months. Uh So what's your 630 00:31:48,970 --> 00:31:52,110 Speaker 1: sense of yield curve control, what's your sense of Japan 631 00:31:52,110 --> 00:31:56,460 Speaker 1: dealing with fiscal sustainability if indeed rates start going up? 632 00:31:57,100 --> 00:32:00,580 Speaker 2: So let's let's start with the economic, the growth numbers. 633 00:32:00,590 --> 00:32:05,970 Speaker 2: So growth is 1.4% up in 2022 634 00:32:06,190 --> 00:32:10,110 Speaker 2: and it reflects a weaker external demand and the disappointing 635 00:32:10,120 --> 00:32:12,440 Speaker 2: GDP out of the third quarter, I think Japan is 636 00:32:12,440 --> 00:32:14,990 Speaker 2: one country where the 3rd 3rd quarter outcomes were weaker 637 00:32:14,990 --> 00:32:17,840 Speaker 2: than expected in many other countries. The Q three was 638 00:32:17,840 --> 00:32:20,880 Speaker 2: very good in Japan, it wasn't the case, but then 639 00:32:20,880 --> 00:32:25,180 Speaker 2: we forecast uh growth in 2020 to be 1.8% and 640 00:32:25,180 --> 00:32:29,620 Speaker 2: that's partly reflecting the fact that there is pent up demand, 641 00:32:29,630 --> 00:32:33,490 Speaker 2: there are supply chain improvements, the country's opened up after 642 00:32:33,490 --> 00:32:35,200 Speaker 2: the pandemic and there is 643 00:32:35,570 --> 00:32:36,260 Speaker 1: broad 644 00:32:36,260 --> 00:32:40,360 Speaker 2: Monitoring fiscal policy support, so 1.8% is I think we 645 00:32:40,360 --> 00:32:43,720 Speaker 2: have revised our numbers on the from the October World 646 00:32:43,720 --> 00:32:47,550 Speaker 2: Economic Outlook. Now inflation in Japan has also risen very 647 00:32:47,550 --> 00:32:50,640 Speaker 2: high and it's I think it's highest and four 648 00:32:50,640 --> 00:32:51,770 Speaker 1: decades and so on. 649 00:32:51,780 --> 00:32:57,270 Speaker 2: But our baseline assumes that inflation will come back to 2% 650 00:32:57,280 --> 00:32:57,940 Speaker 2: by N20 651 00:32:57,940 --> 00:32:58,690 Speaker 1: 24. 652 00:32:59,070 --> 00:33:03,230 Speaker 2: Right, so the question then is uh you always see 653 00:33:03,230 --> 00:33:06,770 Speaker 2: this case in Japan where inflation can go up but 654 00:33:06,770 --> 00:33:10,020 Speaker 2: it comes below 2%. So there's never been the case 655 00:33:10,020 --> 00:33:13,940 Speaker 2: where we've had inflation durably at or about the 2% target. 656 00:33:13,950 --> 00:33:16,430 Speaker 2: So it's in that context, one has to see the 657 00:33:16,440 --> 00:33:17,640 Speaker 2: real control framework. 658 00:33:19,180 --> 00:33:19,770 Speaker 1: And 659 00:33:19,770 --> 00:33:21,010 Speaker 2: so our advice has been 660 00:33:21,010 --> 00:33:22,080 Speaker 1: to keep the 661 00:33:22,080 --> 00:33:24,810 Speaker 2: monetary policy accommodation in place 662 00:33:24,980 --> 00:33:29,180 Speaker 2: so that inflation can come back to 2% on a 663 00:33:29,180 --> 00:33:32,640 Speaker 2: durable basis. And that's where a lot of discussion has 664 00:33:32,640 --> 00:33:35,790 Speaker 2: taken place because they've had they have had episodes in 665 00:33:35,790 --> 00:33:38,219 Speaker 2: the past where inflation looks is coming up and it's 666 00:33:38,220 --> 00:33:40,340 Speaker 2: quickly gone back. So I think that's the risk they 667 00:33:40,340 --> 00:33:42,680 Speaker 2: want to avoid. So it's in that context, one sees 668 00:33:42,680 --> 00:33:47,060 Speaker 2: the yield control framework and you know, in the past 669 00:33:47,060 --> 00:33:49,110 Speaker 2: several months, they have been buying a lot of the 670 00:33:49,120 --> 00:33:52,530 Speaker 2: 10 year and five year G. B. S. So I 671 00:33:52,540 --> 00:33:53,980 Speaker 2: think almost 70 per 672 00:33:54,320 --> 00:33:56,250 Speaker 2: that is held by the central bank. So the question 673 00:33:56,250 --> 00:33:58,500 Speaker 2: there's some issues of market function and so on, so 674 00:33:58,500 --> 00:34:03,030 Speaker 2: in december they allow the the the the yields to 675 00:34:03,030 --> 00:34:05,790 Speaker 2: rise and that's partly related market functioning and so on 676 00:34:05,790 --> 00:34:08,660 Speaker 2: so forth. And that also the kind of flexibility you 677 00:34:08,660 --> 00:34:11,879 Speaker 2: have there is good just in case there is um 678 00:34:11,890 --> 00:34:15,219 Speaker 2: you know upside risks to inflation this, you know allowing 679 00:34:15,219 --> 00:34:18,880 Speaker 2: flexibility is good in that sense. So that's what that's 680 00:34:18,880 --> 00:34:22,230 Speaker 2: been our advice to them and in terms of the 681 00:34:22,230 --> 00:34:23,000 Speaker 2: fiscal 682 00:34:23,739 --> 00:34:24,220 Speaker 1: you know they 683 00:34:24,219 --> 00:34:26,719 Speaker 2: have provided support but some of the support has been 684 00:34:26,730 --> 00:34:30,660 Speaker 2: not targeted. So like other countries will also like Japan 685 00:34:30,660 --> 00:34:33,130 Speaker 2: to provide more targeted support and fiscal term and in 686 00:34:33,130 --> 00:34:35,290 Speaker 2: the in the in store in the near term. But 687 00:34:35,300 --> 00:34:37,529 Speaker 2: going beyond that, I think they have a challenge in 688 00:34:37,530 --> 00:34:41,430 Speaker 2: terms of in an aging population and a longer term 689 00:34:41,430 --> 00:34:44,370 Speaker 2: climate change so on. So the fiscal going forward has 690 00:34:44,370 --> 00:34:47,509 Speaker 2: to be a lot more, there has to be a 691 00:34:47,510 --> 00:34:49,479 Speaker 2: lot more medium term consolidation. 692 00:34:49,489 --> 00:34:50,570 Speaker 1: So that's the kind 693 00:34:50,570 --> 00:34:53,080 Speaker 2: of advice we're having in for Japan 694 00:34:54,170 --> 00:34:58,540 Speaker 1: and you don't worry about that sustainability given the large 695 00:34:58,550 --> 00:35:00,680 Speaker 1: wealth of that nation. 696 00:35:01,550 --> 00:35:04,780 Speaker 2: So at this point it depends upon the who holds 697 00:35:04,780 --> 00:35:07,740 Speaker 2: the debt also right in that context when you talk 698 00:35:07,739 --> 00:35:09,500 Speaker 2: about this the same but it's also looking at who 699 00:35:09,500 --> 00:35:11,980 Speaker 2: holds the debt and so on. But you know when 700 00:35:11,980 --> 00:35:14,830 Speaker 2: when death rises at a very fast level you do 701 00:35:14,830 --> 00:35:16,759 Speaker 2: worry about it. But the question here is that's why 702 00:35:16,760 --> 00:35:20,170 Speaker 2: we're talking about you know have a very well thought 703 00:35:20,170 --> 00:35:23,569 Speaker 2: out credible and realistic medium term fiscal framework that can 704 00:35:23,580 --> 00:35:27,719 Speaker 2: kind of anchor you know celebrity on the forward looking basis. 705 00:35:27,790 --> 00:35:28,820 Speaker 1: Right? 706 00:35:29,330 --> 00:35:34,210 Speaker 1: Um Krishna you have in your earlier part of your 707 00:35:34,210 --> 00:35:36,950 Speaker 1: interior devoted quite a bit of time to china. And 708 00:35:36,960 --> 00:35:41,500 Speaker 1: of course now that country probably matters as much as 709 00:35:41,510 --> 00:35:44,120 Speaker 1: any other major countries in the world, be it, you know, U. S. 710 00:35:44,120 --> 00:35:47,290 Speaker 1: Or europe or so on. Um And and again just 711 00:35:47,290 --> 00:35:50,070 Speaker 1: like Japan it's become rather interesting to fall over the 712 00:35:50,070 --> 00:35:53,070 Speaker 1: last couple of months with the reopening walk us through 713 00:35:53,070 --> 00:35:54,340 Speaker 1: your view on china. 714 00:35:55,280 --> 00:35:58,810 Speaker 2: So china, I mean again like you said it's become 715 00:35:58,810 --> 00:36:02,190 Speaker 2: very interesting to work in china especially now with the 716 00:36:02,200 --> 00:36:04,480 Speaker 2: when they when they lifted the covid restrictions, they did 717 00:36:04,480 --> 00:36:08,339 Speaker 2: it you know much faster than what anybody expected what 718 00:36:08,340 --> 00:36:12,770 Speaker 2: we expected before in october 2022. And and so that 719 00:36:12,770 --> 00:36:15,640 Speaker 2: has implications like I mentioned at the beginning, so you 720 00:36:15,640 --> 00:36:20,160 Speaker 2: had growth at 3% in at the end of 2022. 721 00:36:20,170 --> 00:36:23,140 Speaker 2: And given the fact that it opened up the economy 722 00:36:23,150 --> 00:36:23,660 Speaker 2: we x 723 00:36:23,680 --> 00:36:28,290 Speaker 2: respect, you know mobility to return earlier, we had thought 724 00:36:28,290 --> 00:36:31,590 Speaker 2: mobility and consumption would be returning but much more back 725 00:36:31,590 --> 00:36:35,170 Speaker 2: loaded now we brought all of that forward, so we have, 726 00:36:35,180 --> 00:36:38,799 Speaker 2: you know, mobility and consumption picking up in the first 727 00:36:38,800 --> 00:36:43,820 Speaker 2: half of 2023 so through that 5.2% and then we, 728 00:36:43,830 --> 00:36:47,380 Speaker 2: I think we bring it down to 4.5% in 2024 729 00:36:47,770 --> 00:36:50,710 Speaker 2: again, in the case of china, all this is good, 730 00:36:50,710 --> 00:36:53,560 Speaker 2: but they have some serious structural headwinds. I think one 731 00:36:53,570 --> 00:36:54,430 Speaker 2: issue here is the real 732 00:36:54,430 --> 00:36:55,690 Speaker 1: estate sector on 733 00:36:55,690 --> 00:36:58,850 Speaker 2: the real estate sector, you know, they it was the 734 00:36:58,850 --> 00:37:01,410 Speaker 2: three red flags they had in terms of reducing leverage, 735 00:37:01,410 --> 00:37:03,880 Speaker 2: I think that was good, that was spot on. But 736 00:37:03,890 --> 00:37:06,210 Speaker 2: the question is that of course has lead to contagion, 737 00:37:06,210 --> 00:37:09,960 Speaker 2: you know, started with Evergrande and started going to other developers, 738 00:37:09,969 --> 00:37:14,330 Speaker 2: we have not seen a current and cogent response of 739 00:37:14,330 --> 00:37:14,720 Speaker 2: real estate 740 00:37:14,719 --> 00:37:15,480 Speaker 1: crisis 741 00:37:16,090 --> 00:37:18,690 Speaker 2: and we feel a lot more can be done at 742 00:37:18,690 --> 00:37:22,430 Speaker 2: the central government level and to provide support to the 743 00:37:22,430 --> 00:37:24,270 Speaker 2: real estate sector, which is a huge part of chinese 744 00:37:24,270 --> 00:37:27,700 Speaker 2: economy and restore confidence in the sector. So then that's 745 00:37:27,700 --> 00:37:29,960 Speaker 2: a headwind. So despite the fact that they've opened up 746 00:37:29,969 --> 00:37:31,730 Speaker 2: and take economy speaking up and so on, there is 747 00:37:31,730 --> 00:37:34,290 Speaker 2: a structural, there is this issue of the real estate 748 00:37:34,290 --> 00:37:38,350 Speaker 2: sector which kind of a serious headwind and going forward, 749 00:37:38,350 --> 00:37:41,680 Speaker 2: we've also revised on our medium term forecasts for for 750 00:37:41,680 --> 00:37:44,350 Speaker 2: for china to below 4% 751 00:37:44,590 --> 00:37:47,049 Speaker 2: and that party relates to the fact that productivity has 752 00:37:47,050 --> 00:37:50,560 Speaker 2: been coming on very sharply. And so they need to 753 00:37:50,570 --> 00:37:53,880 Speaker 2: open up the economy, you know, allow greater competition between 754 00:37:53,880 --> 00:37:56,150 Speaker 2: the state owned enterprise and the private sector and so on. 755 00:37:56,160 --> 00:37:59,580 Speaker 2: So those things are work in progress. But given the 756 00:37:59,580 --> 00:38:02,270 Speaker 2: fact that practice has been a secular decline, we realized 757 00:38:02,270 --> 00:38:06,020 Speaker 2: on our medium term numbers to below 4%. So that 758 00:38:06,020 --> 00:38:08,790 Speaker 2: in a nutshell is the china story time. Let me 759 00:38:08,790 --> 00:38:10,680 Speaker 2: conclude by saying that they do have the policy 760 00:38:10,680 --> 00:38:11,350 Speaker 1: space. 761 00:38:11,880 --> 00:38:14,520 Speaker 2: This is a country where inflation remains muted so they 762 00:38:14,520 --> 00:38:18,080 Speaker 2: can provide support. But what we've argued is more than 763 00:38:18,080 --> 00:38:22,640 Speaker 2: monetary policy, the fiscal policy support geared towards boosting consumption, 764 00:38:22,650 --> 00:38:26,150 Speaker 2: because that would that would really rebalance the economy. It 765 00:38:26,150 --> 00:38:28,710 Speaker 2: would also help address the climate challenge they face. So 766 00:38:28,710 --> 00:38:31,170 Speaker 2: in some sense, this is something we've been telling them 767 00:38:31,180 --> 00:38:33,000 Speaker 2: for some time and they can do it and they 768 00:38:33,000 --> 00:38:36,960 Speaker 2: can provide more targeted transfers, boost consumption. But that's what 769 00:38:36,960 --> 00:38:39,100 Speaker 2: happened they're putting a lot more emphasis on, on the 770 00:38:39,100 --> 00:38:43,380 Speaker 2: public infrastructure side. So that's where it's making the imbalance. 771 00:38:43,390 --> 00:38:46,950 Speaker 2: You know, it's not correcting the imbalance you had and 772 00:38:46,950 --> 00:38:50,469 Speaker 2: that also can bear upon how they address the climate challenge. 773 00:38:50,890 --> 00:38:52,610 Speaker 1: That was going to be my follow up questions and 774 00:38:52,610 --> 00:38:55,230 Speaker 1: you just took it away from me, Krishna one question 775 00:38:55,230 --> 00:38:57,870 Speaker 1: on China, but not necessarily within China, but its external 776 00:38:57,870 --> 00:39:02,340 Speaker 1: impact is related to inflation. So 12 years ago when 777 00:39:02,340 --> 00:39:04,720 Speaker 1: the world was going through a big global financial crisis, 778 00:39:04,719 --> 00:39:08,310 Speaker 1: China was still growing robustly and we saw oil prices 779 00:39:08,320 --> 00:39:11,910 Speaker 1: find a lot of support because China's demand was substantial. 780 00:39:11,920 --> 00:39:16,100 Speaker 1: Is this reopening dynamic that we're seeing in China could 781 00:39:16,100 --> 00:39:18,060 Speaker 1: be a source of upside risk to 782 00:39:18,310 --> 00:39:21,900 Speaker 1: Demand for commodities and therefore inflation in 2023? 783 00:39:22,550 --> 00:39:25,589 Speaker 2: It could well be, could well be i we're looking at, 784 00:39:25,600 --> 00:39:28,970 Speaker 2: we're looking at the classes right now, but like I said, 785 00:39:28,980 --> 00:39:33,410 Speaker 2: there's an upside to growth from china opening up 5.2%. 786 00:39:33,420 --> 00:39:35,629 Speaker 2: The question is, what does it mean for oil and 787 00:39:35,630 --> 00:39:38,380 Speaker 2: commodity prices? What you've seen in the past is when 788 00:39:38,380 --> 00:39:41,790 Speaker 2: china has grown very fast, commodity prices have gone up 789 00:39:41,790 --> 00:39:44,090 Speaker 2: that supported economies in latin America where I used to 790 00:39:44,090 --> 00:39:46,570 Speaker 2: work before. So the question is, can you, will that 791 00:39:46,570 --> 00:39:50,210 Speaker 2: be repeated now or are there are there other mitigating 792 00:39:50,210 --> 00:39:50,620 Speaker 2: slowdown 793 00:39:50,640 --> 00:39:54,620 Speaker 2: In other countries? Which overall impact? Maybe not so much, 794 00:39:54,640 --> 00:39:56,529 Speaker 2: but I still think that is an upside risk to 795 00:39:56,530 --> 00:40:00,650 Speaker 2: inflation in 2023 and 2020 for it all depends about 796 00:40:00,650 --> 00:40:02,430 Speaker 2: how the rest of the world was. 797 00:40:02,440 --> 00:40:03,180 Speaker 1: Yeah, 798 00:40:03,190 --> 00:40:04,150 Speaker 2: but that's a fact. 799 00:40:04,260 --> 00:40:06,830 Speaker 1: Yeah, the markets remain very relaxed about it, but we 800 00:40:06,830 --> 00:40:09,730 Speaker 1: are somewhat more worried than what the market based indicators 801 00:40:09,730 --> 00:40:12,410 Speaker 1: seem to suggest out of this issue. So yeah, we'll 802 00:40:12,410 --> 00:40:14,219 Speaker 1: have to watch that space that they say 803 00:40:14,489 --> 00:40:18,100 Speaker 1: krishna India, everybody's favorite emerging market story, a lot of 804 00:40:18,100 --> 00:40:20,960 Speaker 1: growth potential, but in the last few weeks, some corporate 805 00:40:20,960 --> 00:40:24,229 Speaker 1: governance related issues coming up to the four um Tell 806 00:40:24,230 --> 00:40:26,570 Speaker 1: us about your assessment on India 807 00:40:26,580 --> 00:40:29,830 Speaker 2: so on India you know supporter makes the fact that 808 00:40:29,830 --> 00:40:32,700 Speaker 2: India is expected to be on the fastest growing economies 809 00:40:32,700 --> 00:40:33,330 Speaker 2: of scale. 810 00:40:33,510 --> 00:40:37,240 Speaker 2: I think we have it at 6.1%. We haven't changed 811 00:40:37,239 --> 00:40:39,440 Speaker 2: our numbers from what we had time or in October 812 00:40:39,450 --> 00:40:45,400 Speaker 2: so it's going to protect its predicted 6.1% 2023 rising 6.8% 813 00:40:45,410 --> 00:40:49,720 Speaker 2: and there's sufficient actually there's a lot of resilient domestic 814 00:40:49,719 --> 00:40:52,440 Speaker 2: demand which is actually pumping which is pushing the economy. 815 00:40:52,650 --> 00:40:57,450 Speaker 2: Uh inflation was rising quite sharply. The reserve bank of 816 00:40:57,450 --> 00:41:00,770 Speaker 2: India was tightening policies appropriately to bring inflation down. I 817 00:41:00,770 --> 00:41:05,080 Speaker 2: think it's not moderated 5.7% in december which is below 818 00:41:05,080 --> 00:41:07,920 Speaker 2: the R. B. I. Is four plus minus two tolerance bank. 819 00:41:07,930 --> 00:41:12,590 Speaker 2: So I think they have growth which is quite robust. 820 00:41:12,600 --> 00:41:18,240 Speaker 2: So it is a relative bright spot and inflation 821 00:41:18,680 --> 00:41:18,980 Speaker 1: it's 822 00:41:18,980 --> 00:41:21,620 Speaker 2: still elevated. It's come down, I would still think that 823 00:41:21,620 --> 00:41:25,020 Speaker 2: the onus would be on the reserve bank to keep 824 00:41:25,030 --> 00:41:29,500 Speaker 2: you know policy tight so that you know inflation comes 825 00:41:29,500 --> 00:41:33,500 Speaker 2: down on a more durable basis. On the fiscal side. 826 00:41:34,250 --> 00:41:38,700 Speaker 2: I think the the budget was was was did not, 827 00:41:38,700 --> 00:41:41,310 Speaker 2: I mean there was there was some fear in markets 828 00:41:41,310 --> 00:41:43,580 Speaker 2: that because next year is an election year there would 829 00:41:43,580 --> 00:41:45,570 Speaker 2: be a lot of freebies and so on. But I 830 00:41:45,570 --> 00:41:47,960 Speaker 2: think they've had they've made it very responsible. So I 831 00:41:47,960 --> 00:41:51,200 Speaker 2: think that the budget was very responsible in terms of 832 00:41:51,200 --> 00:41:51,469 Speaker 2: fiscal 833 00:41:51,480 --> 00:41:55,850 Speaker 2: consolidation, they made many changes to income income tax side, 834 00:41:55,860 --> 00:41:58,580 Speaker 2: put a lot of emphasis on, on Capex, which I 835 00:41:58,580 --> 00:42:01,480 Speaker 2: think they believe that it has higher multipliers to bring 836 00:42:01,480 --> 00:42:03,800 Speaker 2: in the private sector. So I think that's, that's geared 837 00:42:03,800 --> 00:42:06,490 Speaker 2: where the question is whether the states respond to the 838 00:42:06,489 --> 00:42:08,700 Speaker 2: increase in Capex, that's something that you have to see 839 00:42:08,960 --> 00:42:11,120 Speaker 2: in terms of corporate guns. Yes, we have seen the 840 00:42:11,120 --> 00:42:15,709 Speaker 2: recent issues in with one of the conglomerates. I think 841 00:42:15,719 --> 00:42:18,590 Speaker 2: so far the impact on the market has been limited. 842 00:42:18,590 --> 00:42:23,310 Speaker 2: I think I've seen the Ministry of Finance talk about 843 00:42:23,310 --> 00:42:25,600 Speaker 2: the fact that this is limited to one conglomerate. There 844 00:42:25,600 --> 00:42:28,180 Speaker 2: are the regulatory agency is doing its job, let it 845 00:42:28,180 --> 00:42:30,799 Speaker 2: do its job. So so far the limit, the followers 846 00:42:30,800 --> 00:42:33,680 Speaker 2: have been limited, but we are watching, we are watching 847 00:42:33,680 --> 00:42:37,730 Speaker 2: the situation the situation carefully. And again, I think 848 00:42:38,370 --> 00:42:40,810 Speaker 2: even for completing India, I mean, there are medium term 849 00:42:40,810 --> 00:42:44,270 Speaker 2: challenges both in terms of uh you know, what needs 850 00:42:44,270 --> 00:42:47,450 Speaker 2: to be done social safety nets in terms of climate change. 851 00:42:47,460 --> 00:42:53,380 Speaker 2: So the fiscal, they have to have uh well fleshed 852 00:42:53,380 --> 00:42:54,040 Speaker 1: out 853 00:42:54,050 --> 00:42:54,930 Speaker 2: credible real estate, 854 00:42:54,940 --> 00:42:58,850 Speaker 2: Medium-term fiscal framework. I think that that would be really 855 00:42:58,850 --> 00:43:02,060 Speaker 2: a big plus if they have that. But other than that, 856 00:43:02,060 --> 00:43:04,220 Speaker 2: I think at this point in time it is, it 857 00:43:04,219 --> 00:43:07,549 Speaker 2: is a bright spot. Uh you know, and along with 858 00:43:07,550 --> 00:43:10,529 Speaker 2: China accounts for 50% of global growth this year. So 859 00:43:10,530 --> 00:43:11,500 Speaker 2: that tells you something 860 00:43:11,700 --> 00:43:15,310 Speaker 1: indeed indeed, Krishna when I covered India at the I. M. 861 00:43:15,310 --> 00:43:18,680 Speaker 1: F way back when one striking thing that I used 862 00:43:18,680 --> 00:43:22,210 Speaker 1: to notice was that the central government's total spending on 863 00:43:22,219 --> 00:43:26,380 Speaker 1: interest expenditure was equal or more than total spending on 864 00:43:26,380 --> 00:43:29,880 Speaker 1: health and education. My understanding is that that dynamic hasn't 865 00:43:29,880 --> 00:43:32,790 Speaker 1: changed that much. Now. You talk about 866 00:43:32,960 --> 00:43:36,650 Speaker 1: FBI upside. We read a lot about this whole china 867 00:43:36,650 --> 00:43:40,330 Speaker 1: plus one policy by many companies likely to benefit India 868 00:43:40,330 --> 00:43:43,250 Speaker 1: substantially if we're going to see a very big pickup 869 00:43:43,260 --> 00:43:46,180 Speaker 1: in manufacturing, which is I think what the government also wants, 870 00:43:46,190 --> 00:43:51,170 Speaker 1: um do we have sufficient good quality human capital to 871 00:43:51,180 --> 00:43:53,710 Speaker 1: be deployed to support that manufacturing. 872 00:43:55,239 --> 00:43:57,790 Speaker 2: It's a good question time. Or let me be honest, 873 00:43:57,790 --> 00:44:01,030 Speaker 2: I don't know the answer as to, I've heard, I've 874 00:44:01,030 --> 00:44:05,090 Speaker 2: heard others talk about the fact that given notwithstanding the 875 00:44:05,090 --> 00:44:07,319 Speaker 2: fact that produced many engineers, how many of them are 876 00:44:07,320 --> 00:44:10,529 Speaker 2: employed and so on. I think it will be important 877 00:44:10,540 --> 00:44:14,820 Speaker 2: for all these countries to invest more in education to 878 00:44:14,820 --> 00:44:18,120 Speaker 2: increase sales skills, space. And I think that's extremely important 879 00:44:18,130 --> 00:44:21,729 Speaker 2: because if you want to be a recipient of 880 00:44:21,969 --> 00:44:26,150 Speaker 2: the kind of manufacturing relocation away from china or in 881 00:44:26,150 --> 00:44:29,799 Speaker 2: the services and education or services boost you want to 882 00:44:29,800 --> 00:44:32,259 Speaker 2: have good skills? I think it's important to invest in 883 00:44:32,270 --> 00:44:35,140 Speaker 2: in good education and skills, I think that has to 884 00:44:35,140 --> 00:44:39,090 Speaker 2: be done. I think in terms of, in terms of 885 00:44:39,100 --> 00:44:42,770 Speaker 2: uh moving when countries think about companies think of moving 886 00:44:42,770 --> 00:44:46,100 Speaker 2: away from china, I think china India has India is 887 00:44:46,100 --> 00:44:48,970 Speaker 2: well placed to take advantage of that. I think the 888 00:44:48,969 --> 00:44:51,600 Speaker 2: big debate is whether India should 889 00:44:52,140 --> 00:44:56,120 Speaker 2: focus more on services rather than manufacturing. To me that's 890 00:44:56,120 --> 00:44:59,120 Speaker 2: a false debate. I think you can focus on both 891 00:44:59,130 --> 00:45:03,060 Speaker 2: because in terms of the multipliers for job generation, manufacturing 892 00:45:03,060 --> 00:45:05,740 Speaker 2: is a lot higher. So in a in a country 893 00:45:05,739 --> 00:45:09,320 Speaker 2: which has just become the largest world's largest in terms 894 00:45:09,320 --> 00:45:12,420 Speaker 2: of population and a lot of youth looking to 895 00:45:12,440 --> 00:45:14,799 Speaker 2: jobs, I think we have to move on both fronts 896 00:45:14,800 --> 00:45:18,500 Speaker 2: into both in terms of manufacturing and services and I 897 00:45:18,500 --> 00:45:21,790 Speaker 2: think whether you do and whatever you do in terms 898 00:45:21,790 --> 00:45:25,569 Speaker 2: of the business environment has to get better and skills based, 899 00:45:25,570 --> 00:45:27,270 Speaker 2: I think it's very, very important. So the more you 900 00:45:27,270 --> 00:45:31,239 Speaker 2: invest in education and retooling the labor force, the bigger 901 00:45:31,239 --> 00:45:32,730 Speaker 2: the dividends down the road. 902 00:45:33,480 --> 00:45:38,240 Speaker 1: Absolute. Krishna India is hosting the G-20 this year. Last 903 00:45:38,239 --> 00:45:41,200 Speaker 1: year's host was Indonesia. So let's talk a little bit 904 00:45:41,200 --> 00:45:42,020 Speaker 1: about Indonesia. 905 00:45:43,070 --> 00:45:46,069 Speaker 2: So, so Indonesia is one of these countries, which I 906 00:45:46,070 --> 00:45:50,430 Speaker 2: was following very closely and you know, real GDP growth 907 00:45:50,440 --> 00:45:54,180 Speaker 2: is estimated to grow at 5.3%, Right. And I think 908 00:45:54,180 --> 00:45:56,880 Speaker 2: this was supported by high commodity prices, 909 00:45:56,890 --> 00:45:57,759 Speaker 1: growth 910 00:45:57,760 --> 00:46:03,180 Speaker 2: Expected moderate to 4.8%, and why is that? It's reflecting 911 00:46:03,190 --> 00:46:04,970 Speaker 2: a combination of um 912 00:46:05,450 --> 00:46:08,690 Speaker 2: policies which have become tighter monetary policy has gone up 913 00:46:08,700 --> 00:46:11,000 Speaker 2: or they tightened by 2 25 basis points I think 914 00:46:11,000 --> 00:46:15,850 Speaker 2: to 5.75 policy rate and fiscal policy has also tightened. 915 00:46:15,850 --> 00:46:18,910 Speaker 2: So and they have not come back because the fiscal 916 00:46:18,910 --> 00:46:23,030 Speaker 2: policy was actually overperforming. They've been able to come back 917 00:46:23,030 --> 00:46:26,330 Speaker 2: to their earlier, they've been able to come back to 3% 918 00:46:26,330 --> 00:46:27,630 Speaker 2: deficit ceiling earlier next. 919 00:46:27,660 --> 00:46:31,950 Speaker 2: So I think Indonesian one country was well placed to 920 00:46:31,950 --> 00:46:35,750 Speaker 2: do well. And I think uh in terms of policies 921 00:46:35,760 --> 00:46:38,750 Speaker 2: they're doing the right thing they had, there was some 922 00:46:38,750 --> 00:46:43,130 Speaker 2: amount of direct monetary financing during the pandemic years. They 923 00:46:43,140 --> 00:46:46,340 Speaker 2: rolled that back. They have tightened fiscal, they've tightened monetary, 924 00:46:46,340 --> 00:46:48,760 Speaker 2: I think they're now they're well placed. And I think 925 00:46:48,770 --> 00:46:49,860 Speaker 2: if 926 00:46:50,410 --> 00:46:50,850 Speaker 1: if 927 00:46:50,850 --> 00:46:53,000 Speaker 2: things slip a little bit on growth they do have 928 00:46:53,000 --> 00:46:56,170 Speaker 2: the space to support. So I think overall, I think 929 00:46:56,180 --> 00:47:00,140 Speaker 2: Indonesia is well placed and in terms of positive recommendations, 930 00:47:00,140 --> 00:47:00,680 Speaker 2: I think we would 931 00:47:00,680 --> 00:47:02,009 Speaker 1: say keep 932 00:47:02,010 --> 00:47:05,180 Speaker 2: your eye on inflation because you don't want inflation to 933 00:47:05,190 --> 00:47:07,620 Speaker 2: come down and suddenly go up so you want inflation, 934 00:47:07,630 --> 00:47:10,460 Speaker 2: keep eyes on that allow the exchange rate to be 935 00:47:10,469 --> 00:47:14,600 Speaker 2: uh to move many of the countries in Asia, you know, 936 00:47:14,610 --> 00:47:17,840 Speaker 2: you are worried about exchange movements but I think allowing 937 00:47:17,840 --> 00:47:19,980 Speaker 2: exchanges to be flexible and the second is good 938 00:47:20,140 --> 00:47:22,830 Speaker 2: and uh yeah, so I would say that Indonesia is 939 00:47:22,830 --> 00:47:26,910 Speaker 2: quite well pleased today to to read the benefits when 940 00:47:26,910 --> 00:47:27,820 Speaker 2: they call it picks up 941 00:47:28,080 --> 00:47:31,110 Speaker 1: perhaps drawing a threat from the conversation that we had 942 00:47:31,110 --> 00:47:36,060 Speaker 1: on India. What's your sense of their strategy to attract 943 00:47:36,060 --> 00:47:39,520 Speaker 1: a lot of FBI? I've seen some headlines on the 944 00:47:39,520 --> 00:47:42,650 Speaker 1: high value added on the metal sector and trying to 945 00:47:42,650 --> 00:47:46,770 Speaker 1: become a hub for electric vehicle. So, are you observing 946 00:47:46,780 --> 00:47:51,759 Speaker 1: some real momentum behind structural policies to boost employment through 947 00:47:51,760 --> 00:47:53,180 Speaker 1: investment in manufacturing? 948 00:47:53,489 --> 00:47:56,960 Speaker 2: Yes, I think they are. They are using both the 949 00:47:56,969 --> 00:48:01,950 Speaker 2: the climate debate and the durable high growth debate to 950 00:48:01,950 --> 00:48:05,870 Speaker 2: move towards high value added sectors. And they are trying 951 00:48:05,870 --> 00:48:10,480 Speaker 2: to see in a world where there could be capital 952 00:48:10,480 --> 00:48:10,980 Speaker 2: coming out 953 00:48:10,989 --> 00:48:12,840 Speaker 2: china and moving to other countries, they want to be 954 00:48:12,840 --> 00:48:15,110 Speaker 2: a recipient. So I think they're doing a lot of good, 955 00:48:15,110 --> 00:48:19,500 Speaker 2: good things there. And the overall macro also provides the 956 00:48:19,500 --> 00:48:22,359 Speaker 2: key indicator right, for any investor. So I think they're 957 00:48:22,360 --> 00:48:24,060 Speaker 2: working on that. So I think overall, I think they 958 00:48:24,060 --> 00:48:28,480 Speaker 2: are geared towards doing well going forward. 959 00:48:29,150 --> 00:48:33,270 Speaker 1: Okay. So we talked about four very large asian economies 960 00:48:33,280 --> 00:48:36,650 Speaker 1: with a combined population of around three billion. Want to 961 00:48:36,650 --> 00:48:39,980 Speaker 1: finish this conversation by talking about a country of 5.5 million. 962 00:48:39,989 --> 00:48:43,570 Speaker 1: My backyard Singapore where you have been to many, many 963 00:48:43,570 --> 00:48:45,620 Speaker 1: times Krishna and I hope to see you there here 964 00:48:45,620 --> 00:48:48,140 Speaker 1: soon again. Uh, tell us a bit about I. M. 965 00:48:48,140 --> 00:48:50,739 Speaker 1: S assessment on Singapore's current state. 966 00:48:51,469 --> 00:48:55,880 Speaker 2: So I think Singapore. I think we have the growth 967 00:48:55,890 --> 00:48:59,440 Speaker 2: at 3.7% in 2022. I'm not sure it's changed a 968 00:48:59,440 --> 00:49:03,590 Speaker 2: lot since we last did forecast. And it was back 969 00:49:03,590 --> 00:49:07,250 Speaker 2: on a positive surprise. I think consumption was better than 970 00:49:07,250 --> 00:49:09,520 Speaker 2: we expected in the in the third quarter. Like I 971 00:49:09,520 --> 00:49:11,779 Speaker 2: was saying many countries did very well in third quarter 972 00:49:11,790 --> 00:49:14,240 Speaker 2: except maybe for Japan. But I think Singapore the third 973 00:49:14,239 --> 00:49:16,580 Speaker 2: quarter came out very strong. So I think that kind 974 00:49:16,580 --> 00:49:17,150 Speaker 2: of helped 975 00:49:17,170 --> 00:49:21,490 Speaker 2: Provide a fillip to growth which came at 3.7%. We 976 00:49:21,489 --> 00:49:26,029 Speaker 2: forecast some slowing in 2023 and reflecting weakening external demand 977 00:49:26,030 --> 00:49:29,810 Speaker 2: from some key trading partners. And I think the external 978 00:49:29,810 --> 00:49:34,040 Speaker 2: headwinds are expected to weigh on growth for Singapore. I 979 00:49:34,040 --> 00:49:37,880 Speaker 2: think even domestically saying some of the major trade oriented 980 00:49:37,880 --> 00:49:41,180 Speaker 2: sectors like semiconductors are expected to slow a little bit 981 00:49:41,180 --> 00:49:42,870 Speaker 2: because of what's the external headwinds. 982 00:49:43,040 --> 00:49:47,560 Speaker 2: Inflation has been rising quite rapidly because of transportation energy 983 00:49:47,560 --> 00:49:52,510 Speaker 2: prices but I think headline inflation about 6.2% before falling 984 00:49:52,510 --> 00:49:54,520 Speaker 2: to 5.8% inflation is 985 00:49:54,530 --> 00:49:55,230 Speaker 1: on the higher 986 00:49:55,230 --> 00:49:57,130 Speaker 2: side and they have to keep an eye on that 987 00:49:57,130 --> 00:50:01,580 Speaker 2: so continue you know, tightening monetary policy. And I think 988 00:50:01,580 --> 00:50:04,640 Speaker 2: in terms of the fiscal support you want to be 989 00:50:04,640 --> 00:50:07,050 Speaker 2: making you want to make it a lot more targeted 990 00:50:07,060 --> 00:50:10,910 Speaker 2: on and and to address 991 00:50:11,090 --> 00:50:11,490 Speaker 1: to go 992 00:50:11,489 --> 00:50:13,719 Speaker 2: hand in glove with monetary policy. I mean Singapore has 993 00:50:13,719 --> 00:50:17,779 Speaker 2: enough fiscal space. So if growth really stumbles then you 994 00:50:17,780 --> 00:50:21,130 Speaker 2: have the fiscal space to provide uh support. 995 00:50:21,480 --> 00:50:21,740 Speaker 1: But 996 00:50:21,739 --> 00:50:26,100 Speaker 2: at this point in time, I think this is, it's 997 00:50:26,100 --> 00:50:29,380 Speaker 2: a beacon of macro stability right. Singapore has always been. 998 00:50:29,390 --> 00:50:32,420 Speaker 2: So I think they're doing the right things but keep 999 00:50:32,420 --> 00:50:36,069 Speaker 2: an eye on inflation, not you know, wishing a bit 1000 00:50:36,070 --> 00:50:38,980 Speaker 2: too much and you know, keep that focus. I think 1001 00:50:38,980 --> 00:50:41,549 Speaker 2: that's true for all of Asia and we're seeing that 1002 00:50:41,560 --> 00:50:44,830 Speaker 2: in particular because headline inflation definitely coming down that code 1003 00:50:44,830 --> 00:50:48,120 Speaker 2: inflation across the region, including the small countries is 1004 00:50:48,140 --> 00:50:51,859 Speaker 2: about targets. So let's keep focus on inflation and fiscal 1005 00:50:51,880 --> 00:50:55,490 Speaker 2: going hand in glove with with monetary policy by the same, 1006 00:50:55,489 --> 00:50:58,229 Speaker 2: not recognizing the fact that some people need to be supported, 1007 00:50:58,239 --> 00:51:02,880 Speaker 2: provide targeted support and if things fall quite sharply on growth, 1008 00:51:02,890 --> 00:51:05,160 Speaker 2: you have the fiscal space. So you're, you're kind of 1009 00:51:05,160 --> 00:51:06,140 Speaker 2: a good spot, 1010 00:51:06,190 --> 00:51:06,989 Speaker 1: I would say 1011 00:51:07,000 --> 00:51:08,110 Speaker 2: christian when you were talking 1012 00:51:08,110 --> 00:51:10,440 Speaker 1: about India, you made a very interesting point which is, 1013 00:51:10,440 --> 00:51:12,669 Speaker 1: you don't have to have a trade off between excellence 1014 00:51:12,670 --> 00:51:14,770 Speaker 1: and services and excellence and manufacturing. 1015 00:51:15,060 --> 00:51:18,070 Speaker 1: Singapore is a classic example where the country has consistently 1016 00:51:18,070 --> 00:51:21,070 Speaker 1: moved up the value chain and maintained a decent manufacturing 1017 00:51:21,070 --> 00:51:24,489 Speaker 1: footprint even though it's very wealthy on a per capita basis. 1018 00:51:24,489 --> 00:51:27,129 Speaker 1: And nobody would be surprised if it became like Hong 1019 00:51:27,130 --> 00:51:29,129 Speaker 1: kong like, you know, almost all of the GDP comes 1020 00:51:29,130 --> 00:51:31,710 Speaker 1: from services, but the country chose not to 1021 00:51:31,940 --> 00:51:34,379 Speaker 1: um I just want you to sort of think about 1022 00:51:34,380 --> 00:51:37,560 Speaker 1: this question in the context of china, uh you as 1023 00:51:37,560 --> 00:51:40,470 Speaker 1: an organization for decades have advocated that, you know, china 1024 00:51:40,469 --> 00:51:44,080 Speaker 1: focused more on consumption and less on sort of heavy 1025 00:51:44,080 --> 00:51:47,390 Speaker 1: investment and so on. But the Singapore example, which is 1026 00:51:47,400 --> 00:51:49,350 Speaker 1: to hold on to manufacturing share of GDP as much 1027 00:51:49,350 --> 00:51:52,150 Speaker 1: as possible, would you recommend that to a country like 1028 00:51:52,150 --> 00:51:55,320 Speaker 1: china as well, that even if you get wealthier, um 1029 00:51:55,330 --> 00:51:57,830 Speaker 1: don't give up on manufacturing, don't let it hollow out. 1030 00:51:58,560 --> 00:52:01,930 Speaker 2: So, so I think you can always move the value chain. Right? So, 1031 00:52:01,930 --> 00:52:04,480 Speaker 2: I again, as a personal view of them or I 1032 00:52:04,480 --> 00:52:07,250 Speaker 2: would say that in countries like china and India where 1033 00:52:07,250 --> 00:52:09,709 Speaker 2: you have a large population, you have a lot of 1034 00:52:09,719 --> 00:52:11,489 Speaker 2: youth looking for jobs 1035 00:52:11,739 --> 00:52:15,049 Speaker 2: just focusing on services may not do it for you. So, 1036 00:52:15,050 --> 00:52:18,670 Speaker 2: you have to think in terms of the, the, the, 1037 00:52:18,680 --> 00:52:20,500 Speaker 2: I think some of the work we have done, in fact, 1038 00:52:20,500 --> 00:52:22,950 Speaker 2: we continue doing more work to see including the India 1039 00:52:22,950 --> 00:52:27,529 Speaker 2: context to see whether what is the multiple effect of, 1040 00:52:27,540 --> 00:52:30,500 Speaker 2: you know, focusing on manufacturing and services, you clearly see 1041 00:52:30,500 --> 00:52:33,990 Speaker 2: the employment impact is quite significant. So, I don't think 1042 00:52:33,989 --> 00:52:37,330 Speaker 2: countries have that, it's a very personal trying to do 1043 00:52:37,330 --> 00:52:39,850 Speaker 2: the research here that you have to 1044 00:52:39,880 --> 00:52:42,540 Speaker 2: focus on both manufacturing, you don't, I don't see why 1045 00:52:42,540 --> 00:52:44,900 Speaker 2: you have to do one versus the other, Maybe you 1046 00:52:44,900 --> 00:52:46,920 Speaker 2: have a competitive advantage and they have a competitive advantage 1047 00:52:46,920 --> 00:52:49,310 Speaker 2: in services at the same time you also have a 1048 00:52:49,310 --> 00:52:53,390 Speaker 2: large labor force. You do have, you do have a 1049 00:52:53,400 --> 00:52:56,410 Speaker 2: good platform to be manufacturing hub. Right? If you do 1050 00:52:56,410 --> 00:52:59,000 Speaker 2: address some key reforms like labor markets, land and so 1051 00:52:59,000 --> 00:53:03,020 Speaker 2: on you could still be a place a platform for 1052 00:53:03,020 --> 00:53:06,010 Speaker 2: manufacturing activity. So I think that whole so I would 1053 00:53:06,010 --> 00:53:07,000 Speaker 2: not I would 1054 00:53:07,000 --> 00:53:08,500 Speaker 1: not 1055 00:53:08,500 --> 00:53:09,600 Speaker 2: I would say that 1056 00:53:09,930 --> 00:53:11,600 Speaker 2: you can do both. I think to me it's a 1057 00:53:11,600 --> 00:53:12,810 Speaker 2: little bit of a false debate. 1058 00:53:12,820 --> 00:53:16,360 Speaker 1: Yeah it's a it's a very very interesting piece of 1059 00:53:16,360 --> 00:53:19,450 Speaker 1: observation krista and I think there's definitely more work to 1060 00:53:19,450 --> 00:53:23,259 Speaker 1: be done given asia going in myriad directions. Some countries 1061 00:53:23,260 --> 00:53:26,000 Speaker 1: are aging, some countries are youthful, some countries are very 1062 00:53:26,000 --> 00:53:29,049 Speaker 1: vulnerable to climate change. Some countries have the great power arrival. 1063 00:53:29,050 --> 00:53:29,900 Speaker 1: If you deal with 1064 00:53:30,140 --> 00:53:33,470 Speaker 1: christian. I don't know if my listeners appreciate it but 1065 00:53:33,480 --> 00:53:35,840 Speaker 1: I know how many different directions and a P. D. 1066 00:53:35,840 --> 00:53:38,750 Speaker 1: Director gets pulled. So I'm extremely grateful that you took 1067 00:53:38,750 --> 00:53:40,920 Speaker 1: an hour of your time to spend with me and 1068 00:53:40,920 --> 00:53:43,310 Speaker 1: my listeners. So thank you so much. 1069 00:53:43,320 --> 00:53:45,569 Speaker 2: You're welcome. Time are always good to see you always 1070 00:53:45,570 --> 00:53:48,020 Speaker 2: good to talk to you about issues. When I come Singapore. 1071 00:53:48,020 --> 00:53:50,510 Speaker 2: We can exchange ideas on what we can do more 1072 00:53:50,510 --> 00:53:51,260 Speaker 2: in a P. D. 1073 00:53:51,270 --> 00:53:54,299 Speaker 1: Absolutely. And I'll see you in Washington. Hopefully in april 1074 00:53:54,300 --> 00:53:57,430 Speaker 1: during the spring meetings, I'd like to conclude by thanking 1075 00:53:57,430 --> 00:53:59,170 Speaker 1: our listeners Kobe time 1076 00:53:59,180 --> 00:54:02,540 Speaker 1: was produced by Kendall bridge daisy Sharma and violently provided 1077 00:54:02,540 --> 00:54:06,069 Speaker 1: additional assistance. This podcast is for information only and does 1078 00:54:06,070 --> 00:54:09,969 Speaker 1: not offer any investment advice. All 94 episodes of Kobe 1079 00:54:09,969 --> 00:54:13,910 Speaker 1: timer available on Youtube and all major platforms, including Apple, 1080 00:54:13,910 --> 00:54:18,310 Speaker 1: google and Spotify. As for our research publications and webinar recordings, 1081 00:54:18,320 --> 00:54:21,239 Speaker 1: you can find them all by googling DBS Research Library 1082 00:54:21,250 --> 00:54:22,760 Speaker 1: Have a great day.