 Good afternoon everyone and welcome to this press conference on behalf of the International Monetary Fund I'm Jerry Rice of the communication department and the occasion Today is the release of our update to the world economic outlook I'm very pleased that we have with us today the managing director of the IMF Madame Christine Lagarde. We also have with us our economic counselor and director of the research department Gita Gopinath and just to Gita's left We have the deputy director of that department who is Gianmaria Melesi Ferretti So I'm going to ask the managing director to make a few opening remarks followed by Gita and Then we'll come to your questions. Thank you managing director Thank you very much Jerry and thank you and good afternoon to all of you It's very nice to to see many familiar faces and and good friends and to be back in Davos this year It also gives me huge pleasure actually To introduce to you if you hadn't met her before or didn't know her or of her our new chief economist Gita Gopinath We're delighted that she has joined us and we're all extremely pleased to work together And I'm really honored that we are sharing the the podium today for you I'm also very grateful to Klaus Schwab and to the world economic forum Who are giving us a chance to present the update to our world economic outlook? this year and It will be my privilege to say a few remarks without giving you much by worth numbers because that is the remit of Gita and Gianmaria, so How many of you do cross-country skiing here? No. Oh, thank you Brilliant because I want to run the analogy of cross-country skiing for you I'm not good at downhill, but cross-country. I'm okay. So what do you like when you're a cross-country skier? You like good visibility No uncertainty What else do you like you like when it's kind of stable and Eventually when it's a little bit downhill You know risks down no hazards along the way Yeah third thing you really like as well when you're a cross-country skier is everybody skiing in the tracks Okay, now move that to the global economy for a second Last October assume we had started cross-country skiing in October. We downgraded our growth forecast a little bit Risks were on the rise We had bad news on the trade front if not actually materializing at least for some it was but certainly threats Well, I'm afraid that we are going to announce a further downward revision of our forecast So the cross-country skiing is going to be more laborious more efforts will be required The bottom line is that after two years of solid expansion The world economy is growing more slowly than expected and risks are rising But even as the economy Continues to move ahead as I said it is facing significantly higher risks some of them actually related to policy and this risks are Increasingly inter-twinned Think of our higher tariffs and rising uncertainty over future trade policy Fed into lower asset prices and higher market volatility This in turn contributed to tightening financing conditions Including for advanced economies Which is a major risk factor in a world of high-dead burden Now does that mean that a global recession is around the corner? No But the risk of a sharper decline in global growth has certainly increased Add to this the uncertainty the geopolitical worries and Disappointing long-term growth prospect and you have an economic Picture with a pretty clear message and the message is the following For policymakers address remaining vulnerabilities and Be ready if a serious slowdown were to materialize Now what does that mean for most countries? It means harnessing the existing growth momentum because yes, there is growth In order to create more policy room to act And the goal is to make sure that economies are more resilient. They are more inclusive and They move towards more collaboration. So let me distinguish each of these three More resilient in terms of policies. It means reducing high government debt Because that would open space that is needed to fight future downward But this must be done in a fair and growth friendly fashion Monetary policy should be data dependent and exchange rates should be allowed to act as shock absorbers Developing macro potential tools Will further financial sector stability and reduce potential vulnerabilities This also remains the time for economic reforms in order to lift growth especially in labor markets and Infrastructure investments. That's what I mean by resilient inclusive if we are to deliver on the promise of the digital revolution that will be much talked about in Terms of productivity in terms of employment and in terms of long-term growth Then we must make sure that it delivers for all people and That includes helping workers that are displaced as a result of transformations and automation It means creating new and better opportunities for women and In particular for young people. This is the theme that I will address in various form in the next few days resilient inclusive My third point is collaboration Effective international cooperation comes down to fairness to flexibility and to a commitment for the common good and that's where Solidarity also means self-interest. I will develop that theme in the next few days as well So what we need to do all policy makers all skiers Following the tracks We need to redouble our effort to resolve the shared problems that we are facing From fixing the global trade system. Yes, the G20 has called for that and it needs to be delivered upon to fighting corruption and tax evasion to addressing the existential threat of climate change What's in it for the IMF? What the IMF needs to be in a strong position in In order to help all countries because history suggests That's somewhere over there or the horizon They will be unsuspect unexpected developments The international community must come together to build a brighter future for all I've called this a new multilateralism and again, we will be developing that topic in the next few months as It applies to macroeconomic policies in all its dimensions and structural reforms as They need to be applied in many corners of the world Those were my messages. I'm going to disappear and leave the floor to our most eminent Economists starting with our chief economist Gita floor is yours. Thank you managing director Um, so I will flesh out a little more. What's in the outlook? while global growth in 2018 Remained close to post-crisis highs The global expansion is weakening and at a rate that is somewhat faster than expected This update of the world economic outlook projects global growth at 3.5% in 2019 and 3.6% in 2020 that is 0.2 and 0.1 percentage point below last October's projections Now the downward revisions are modest However, we believe the risks to more significant downward corrections are rising While financial markets and advanced economies appear to be decoupled from trade tensions for much of 2018 The two have become intertwined more recently tightening financial conditions and escalating the risks to global growth We have revised downwards are forecast for advanced economies slightly Mainly due to downward revisions for the euro area Within the euro area the significant revisions are for Germany where production difficulties in the auto sector and Lower external demand will weigh on growth in 2019 and for Italy where sovereign and financial risks and The interconnections between the two are adding to headwinds to grow The US expansion continues But the forecast remains for a deceleration with the unwinding of the fiscal stimulus Across advanced economies we foresee growth to slow from 2.3% in 2018 to 2% in 2019 and 1.7% in 2020 This softening growth momentum has provided little lift to inflation While core inflation is close to target in the US Where growth is above trend? It is significantly below target in both the euro area and Japan Economic activity in emerging and developing countries is Also projected to tick down to 4.5% in 2019 With a rebound to 4.9% in 2020 The projection for 2019 has been lowered from October Mainly because of a large projected contraction in Turkey Amid policy tightening and adjustment to more restrictive external financing conditions There is also a significant downgrade to growth in Mexico in 2019 and 2020 Reflecting lower private investment The projected rebound in 2020 is due to an expected recovery in Argentina and Turkey The outlook for emerging markets and developing economies Reflects the continued headwinds from weaker capital flows following the higher US policy rates and exchange rate depreciations Even though they have become less extreme Across emerging economies some of the pickup in inflation reversed towards the end of 2018 Overall the cyclical forces that propelled broad-based growth Since the second half of 2017 may be weakening somewhat faster than we expected in October Trade and investment have slowed Industrial production outside the US has decelerated and Purchasing managers indices have weakened flag flagging soft softening momentum While this does not mean we are staring at an imminent major downturn It is important to take stock of the many rising risks an Escalation of trade tensions and a worsening of financial conditions are two key sources of risk to the outlook Higher trade uncertainty will further dampen investment and disrupt global supply chains A more serious tightening of financial conditions is Particularly costly given the high levels of public and private sector debt in countries In other risks China's growth slowdown could be faster than expected especially if trade tensions continue And this can trigger abrupt sell-offs in financial and commodity markets as was the case in 2015 2016 in Europe the Brexit cliffhanger continues and The costly spillover between sovereign and financial risks in Italy remain a threat in The US a protracted federal government shutdown poses downside risks Given this backdrop Policymakers need to act now to reverse headwinds to growth and Prepare for the next downturn The main policy priority is for countries to resolve cooperatively and quickly their trade disagreements and the resulting policy uncertainty Rather than raising harmful barriers and further destabilizing and already slowing global economy The call of G20 leaders to reform the World Trade Organization in Buenos Aires must be accomplished Where fiscal space is low fiscal policy needs to adjust in a growth-friendly manner To ensure public debt is on a sustainable path while protecting the most vulnerable Monetary policy and advanced economies should continue to normalize carefully The major central banks are keenly aware of the slowing momentum and we expect they will calibrate their next steps in line with these developments Macroprudential tools should be used where financial vulnerabilities are building up and across all economies Measures to boost potential output growth and and enhance inclusiveness are imperatives Lastly given that policy space for countries is more limited than in 2008 Multilateral cooperation will be even more important in the event of a sharper decline in global growth and It is essential that multilateral institutions like the International Monetary Fund have adequate resources to deal with the rising risks Thank you Thank you very much. Kita. Let me turn to some questions in the room. If you could please identify yourself by name and affiliation then we will Try and take as many questions as we can Let me begin with lady down front Can you hold on for the microphone? Thank you very much. I'm Julie from iphone.com of China my question to Gita What's your expectation on residue and the its impact on the global economy and what's your suggestion to the leaders of EU and the Britain how to break the deadlock of residue if the second voting is failed. Thank you very much a No deal Brexit is one of the major risks to our forecast Our forecast incorporate Smooth transition that a deal is actually made And that there is a smooth transition to the new setup but if there is a disruptive Exit or that has continued uncertainty for many more months Both of those are going to weigh negatively on growth going forward And I think it is imperative for the leaders to resolve this uncertainty immediately Thank you Bloomberg in the second row here. You can wait for the mic Thank you very much Eric Martin with Bloomberg I wanted to ask about the modeling for some of the trade scenarios that you mentioned and The downside risks from the trade war in particular What would be the consequences for the global economy of an end to the current truce between the US and China on trade? We that would be an upside risk We had Listen to this very closely in the October wheel And sorry and end to the current truce that things worsen from where they are now. Oh, it's things worse in okay Well, then that would certainly be a worsening of the outlook the When we did a major update in last October following the trade tensions The assumptions were that the higher tariff rate On Chinese imports on sorry US imports from China the 25% higher rate would come into play So if On the plus side that that isn't the case Then that would be a positive upside risk But if in on the other hand if it is a much more serious deterioration In the trade tensions and that would be a much more significant downside risk Okay, I'm gonna swing down to the front lady in the front So they matter from the CNBC. Hello I have a question about China because we received the new GDP figures earlier this morning confirming the slowest growth rate since 1990 how worried about how worried are you about China and whether this will Transition into a wider global growth slowdown. Thank you The Chinese the numbers that we saw for China today are actually completely consistent With our focus so our estimate for 2018 Was 6.6% which is exactly where it came in So what that means is that we certainly not seeing any big rise in a faster pace of slowing down This is consistent with the level of maturity of the Chinese economy The rebalancing of China's economy and so this is you know, I would think of it as a positive Reinforcing of the fact that China's growth while slowing which is to be expected Nothing dramatic is being is happening at this point. Okay. Thank you very much I'm gonna take the other side of the room here. Yes, sir in the front row. I think it's Arabic news I thanks Arab news Frank Kane Arab news of Saudi Arabia Just on the on on the oil price your forecast less than $60 for the next two years is rather more pessimistic than Many others. Can you can you say how you got to that figure? Yep, you're right about the numbers and I'm going to handle with this question. Yeah, so our forecast for the oil price Is based on futures prices? And that is what futures prices indicated at the time we finalized our forecast that is broadly horizontal path for oil prices from Staying below 60 between 55 and and 60. So that is what underpins our Forecast El País in the third row lady in the third row, please Hello, Alitha Contale from El País I've seen the differences you made in your assessment for two economies with new governments It is Mexico and Brazil Why do you see a deterioration in one hand for for Mexico and then you you Have a more upset assessment for the Brazilian economy. Is it for the reforms or the policies announced? Thank you For Brazil, we are seeing continued Growth and these are coming a lot from cyclical factors Which is recovery from the downturn and so that's a cyclical Expansion that we are we are incorporating in there There are still Risks to Brazil's outlook to in the in the sense that very high levels of debt for Brazil remains an issue in the case of Mexico the downward revisions are because of Policy uncertainty and the dampening effect we expect that has on private sector Investment and I'm going to let John Maria jump in here if he has one like to add anything Yes, I would just add that for Mexico we see a somewhat weaker momentum coming in 2019 So that is one factor also contributing to our down revision But I think it's important when one compares the two to Understand that Brazil comes out of a very deep recession in 2015 16 with very moderate growth since then and had needs more room to Close the the output gap Mexico come from a period of not spectacular, but more stable growth Thank you. I'm going to take ITV way at the back Hello there Joel Hills from ITV news Gita in Britain. We are obsessed with the British Cliff had Brexit cliffhanger as you put it I wonder what your view is what is the biggest risk to the British economy? Is it slow down in China or is it disorderly Brexit in your view? The immediate risk would have to be Brexit The uncertainty associated with what the outcome is going to become March. I think has to be the dominant factor And how much longer can this uncertainty continue before it damages the economy? We've already seen the negative effect of this uncertainty on British investment We have done our estimates of what it would be how costly it would be to the British economy to have a No-deal Brexit, which would be a reversal to WTO rules And that would be a decline in long run Output of about of long run GDP of between five to eight percentage points. So those would be quite significant it is Absolutely essential that this uncertainty is resolved sooner than later. Goodness. That's can I just ask a very much Jerry on that I'm going to turn lady next to you, please Hi, Isha Nelson from Quartz And I think one of the things that's noticeable about this is what economic forum of the political leaders that are missing because they're dealing with National crises at home you briefly mentioned the sat down shut down Obviously, we just talked about Brexit But I wanted to introduce France as well and the yellow vest protests happening there and just ask how much longer do these Particularly instances have to go on before you start to see Measurable impact on their national economies and then also the global economy Political risks are clearly very important and in France. We actually Reduced our estimates. So we revised our focus downwards Slightly but because of the LOS Protest that we had towards the end of last year I think what is important, you know instead of waiting for an escalation of these political risks is for leaders to immediately take actions that prevent such such, you know Unhappiness with the way things are working out for some sections of society and these are real genuine concerns That need that need to be addressed Okay. Thank you very much New York Times, please Keith Bradshaw New York Times a question on LDCs. Are you concerned to see rising? Foreign debt among many of the poorest countries at a time when there are also concerns about falling commodity prices as the world's Economy slows and also we see less and less that debt covered by Paris Club. Thank you What our report highlights is that there is actually a great deal of heterogeneity in how LDCs are doing So it is not one story for all LDCs And that is heartening given that actually there has been a fair amount of financial turmoil in 2018 Now it is indeed the case That for some countries the fact that they still have high debt levels and We are You know financial risks are one of the major factors that we are flagging in this in this report It is an important concern and is an important downside factor for commodity prices 2018 of the initial part of 2018 was good for commodity exporters And actually with that increased our estimates for 2018 for some of those countries But going forward with commodity prices coming down. That is that is a negative impact for those economies Thank you very much. I'm going to take two more questions one at the very back gentlemen. Yes, sir You can hold on for the mic. I may have a have a locally from Al Jazeera news channel You just said about you expected that the price of the old between 55 and 60 What do you expect? that impact on the GCC countries Economies and the growth in it, especially Saudi Arabia. She's considered one of the most exporters of From the Middle East and what's the impact on on the other countries that Are in relations with the GCC countries in the Middle East like North Africa and all of those countries I Mean that the the decline in oil prices and the projections for oil going forward certainly We can growth for major commodity exporters Including Saudi Arabia I'm going to let a John Maria add to that. Yeah, so the Indeed the the download revision for Saudi Arabia Growth forecast for 2019 is a point six percent comes from The decision to Restrict oil production taken at the OPEC plus meeting in December So it's reduced a bit reduced oil Output growth and that is the reason for the revision. There are other fact offsetting factors, but not strong enough So fiscal policy has become more expansionary in Saudi Arabia But so the non oil part of the economy is picking up a bit more, but On in the aggregate that there is a negative impact because of the reduced production of oil You mentioned speedlovers to Other countries, of course Typically if you have a slowdown in GCC countries, you will see Somewhat lower remittances That affect some of the countries that send a lot of workers to the region at the same time Some of these countries may be oil importers. So while they get lower remittances Think of Pakistan or Bangladesh They would also benefit on the other side from reduced outlays for oil purchases So the net impact in some cases for importers is going to be positive But again, this remittances channel is an important one to take into account. Thank you, John Maria Okay, I'm gonna make this the last question. So I'm gonna take the gentleman Here. Thank you, sir Thank you Cameron with China Central TV business channel So I want to know what's your take on China's tax cuts, especially the latest round Which is the personal income tax cuts which aims to free financial burden for middle and low income groups With those rounds of tax cuts served to cushion more Some downside risk and increase domestic consumption in the in the year of 2019 The tax cuts for the China implemented along with the loosening of Reserve requirements, both of those are factors that cushioned in our opinion the negative impact of trade uncertainty the trade tariffs And which is why there wasn't we haven't changed actually our forecast for for China going forward since October So we think of both of those as Having played a useful role We however continue to flag that it's important for China to To to Ring fence its financial sector to make sure that Credit growth is sustainable That there is financial regulatory reform And there's still a rebalancing of the economy away from industry towards services. So that has to continue to be the Medium-term long-term goal for China Thank you very much Gita. Thank you. Jan Maria and thanks to all of you. We'll see you in the course of the coming week. Thanks