Surveillance: Bloomberg Global Business Forum

One of the moments of of this September we speak to David Lipton now, who I believe his title as of this I'm looking at my watch and I think we've got like a two hour tick as acting Managing director, David Lipton joins us. Now certainly without question, Dr Lipton, the American representative to the UH International Monetary Fund, to get an update, and it is truly a day of

celebration for the International Monetary Fund. Krystallina Georgieva of Bulgaria, truly a frontline academic, will join the i m F. Is it in the matter of ours? Dr Lipton? Yeah, This week is a big week of transition for US. We have Christine Legard departed, will be celebrating her this weekend. We expect Krystalline and Georgieva to be approved by our decision body, the Executive Board, in a matter of hours, and she'll be Managing director starting Monday morning. It's an

extraordinary transition of geography and and tone. Is is well UH the former leader of the World Bank, of course, esteemed an international economics for years. What does the shift like within the institution? Is it just business as usual? Well, we're very good at transitions. This happens quite a bit. The institution is used to it ready to help her take the helm. You know, you're right. She has vast experience.

Not only is she from Europe, but her experience across emerge and developing economies in her work UH in in in UH, the in Europe and at the World Bank, I think gives her a huge reservoir of support from our membership, really very broadly emerging market countries correctly say this is the first UH managing director from an emerging market Bulgaria. So everyone's very excited and I'm looking forward

to this transition myself. I remember the first rate Bulgarian mathematics of the Koran School of New York University in the academics just extraordinary. I find it fascinating here within the tone of modern capitalism, like Angela Merkel coming out of East Germany that uh, the crystallity Gurgeva came out of the Carl Marks Higher Institute of Economics. Man, I mean, there's this is a real shift. This is thesis antithesis

and now we're going to have synthesis. It's really Paul, Please David, So as a new managing director comes in, David, what do you think is the one of the key challenges facing the I m F Right now? You know, we see UH risks to growth in the short term, and we've had a period of slowing growth in the core economies for a number of years. After all, just two years ago global growth that's closer to four percent,

and now it's closer to three percent. So in this era where there's questions about integration and interconnectedness and multilateralism, the challenges to get our members to cooperate to ward off the risks, to try to secure continued growth UH and to promote faster growth in the future. So I think it will be a growth orientation achieved through international cooperation. One of the threats to that growth orientation is uncertainty that we have in the global economy, principally from trade

issues and uncertainty about global trade. How does that play into kind of the mandate at the I m F. Well, we do see trade tensions and certainty around that as as the number one risk. But but you know and and that it is important that the US and China sit down and resolve this through dialogue. And I think that will mean China having to deal with some of the shortcomings in policies that are UM causing spillovers that

are causing discontent in other countries around the world. But that said, there are other uncertainties to Brexit is a huge uncertainty UM. There are geopolitical uncertainties in the in in the tensions with Iran, various others, and so if uncertainty is UH allowed to continue, this slowdown in trade, which is bringing a slowdown in investment, may become a

crippling problem for the global economy. It's not our base case, our base cases for continued growth UM and it really is important that the world work together to try to address these uncertainties and not have unforced errors. Let's get out front of the meeting that you will have here in a number of weeks, will release the World Economic Outlook, the Green Book, the Stability. I can't remember the color

of the books right now. You keep changing them, I mean, David, But the bottom line is what our audience wants to know, our global Wall Street audience wants to know. Is the second derivative Right now, I look at Korean export important numbers that German numbers the other day. I'm not asking the acting managing director to have these memorized, but you're very aware of the GAMA, the convexity accelerations that are

out there right now. How urgent is it. I think that the way to think about this is that, uh, with the trade tensions, we're seeing trade investment and manufacturing slowing, and that's very broad. But at the same time, consumer sentiment, consumer spending, and service sector is very strong. And so the question is what will happen in the future. Will the um difficulties in the business sector eventually impair consumer sentiment and slow things down, or will the consumer strength

and service sector strength eventually help pull business up. That's possible if we're able to reduce acieties for the future. So I think the uh. You know. To me, the bottom line is growth is slowing, risk of growing and policy makers need to get going and at rhymes and it's an easy to remember. So well, David Lipton with US of the International Monetary Fund, the acting Managing director here as we celebrate Christallina Orgava of Bulgaria will become

the new Managing director, replacing Christine Legard. H Christine Leguard will become the President of the European Center Bank. I'm not gonna ask you to get out front of negative interest rates in the ECB. That would be rude, but I can I ask you. I can ask you, David, the questions of our Buenos Aires office. They have a lot of questions of how the i m F will handle the original experiment that is Argentine. Uh, political, economic, even social economics. What's the next step for the i

m F with an ever dynamic Argentina. You know, Argentina's situation right now is extremely complex. They've had a shock based on the political results of a of a primary and in that setting have had to take some very strong measures to try to calm things down. And I

think they have calmed markets down. So our job in this setting is to help them get through this period, give them advice, work towards an eventual UH resumption of a relationship between of some kind of financial relationship with them, which may have to wait a while. UM, but we're

we're in discussion, they are. The Minister is going to be in Washington having discussions with our team shortly, and we'll be continuing those discussions at the the annual meetings that you mentioned that come up in later in October. You know, we're trying to help Argentina deal with a very difficult situation, and they're working hard to do that. David, do you think the political will exists in Argentina today to move that country or it's the rude questions Argentines

want to stabilize their country and resume growth. I think everyone shares that it's not our business to try to UH divine the political path forward. We can't do that. But we're standing ready to help whichever UH side wins the presidential election and help them find the best way forward for the sake of the Argentine people. The hallmark of the modern I m F is transparency of data.

What do you do in any given nation where you haven't quoted in this case Argentine and Paso in a black market set with a greater depreciation, how does the institution like you deal with the multiple markets of currency or yield day to look, there are places where data are are a big problem, like Venezuela where the data flow has stopped, but that's not the case in Argentina. We've dealt with countries that have parallel markets in many,

many circumstances before. That's not a big challenge, you know. There they've had to put on capital controls in the midst of the market developments that they've had. And when you have capital controls, of course some people try to UMU look for another way to move money out of the country, and parallel rates arise. I think that's something that we can monitor and we can help them over

time deal with UH. You know. I think the bigger the bigger issues there are how to calm the markets and stabilize the situation so that there can be UH an administration after the election that makes longer term plans and policies that can help bring stability, lasting stability and growth to Argentina. You mentioned that it's a very complex issue obviously it's there any sense of timing based upon your discussions with the administration of maybe how this might

play out. Now, it's too soon to be able to say that. I mean we we were having discussions with them. Those will be continuing in Washington this week and then again during the meetings. You know their election is coming up later in October. It's it's just, uh, not something

one can foresee. If you're just joining us a few more minutes with David Lipton of the International Monetary FUNE, of course out of Wesleyan and at Harvard Sterling Economics over the years, and I always, David, love to go back with you to your tenure with Jeffrey Sachs on Russia.

Could we go you have a visceral I would suggest you and Professor Sachs have more of a visceral understanding of the Russian economic experiment out of than anyone breathing, and give us an update on Putin economics in the strength of Russia right now. He had a difficult Moscow election. Granted that's a one off, but give us an update on Russia. Is a frontier economy and e M economy or a g nation. The Russian economy has been managed

very well from the standpoint of macroeconomic stability. They've been very careful about their maintaining a sound budget. As a result, they have almost no UH federal debt UH. You know, President Putin has given strong mandates to his Central Bank Governor Naviolina to make sure that inflation is under control. That's not the issue they have as as a result of there the oil situation and the economic situation and

the sanctions, they have a low growth rate. When we project their growth rate forward, we see it as lower than or roughly the same as Europe in per capita terms. Now that what that means is we are not foreseeing Russian standards of living catching up or going in the direction of catching up to Europe. That's a problem because their their their standard living is lower than Europe, and they should be able, they should be aspiring to raise that standard of living. So I think the challenge for

Russia is the broader long term business model question. What is their strength where they they are a country with great UH education and great technological prowess. The question is how to build a system that has a stronger private sector drive in the adoption and use of technology in ways that will bring prosperity to Russia. That's the challenge.

I think they understand that, but that's the challenge. But this is fascinating because with you and Jeff Sex at the nascent capitalism of the collapse of the Soviet Union, you go to the era I'm going to say, the Oligarcs or whatever that means. How do you perceive Russian capitalism forward? Do they move beyond the early models of

the nineties and the two thousand's. Well, I don't know quite how they get from where they are to what I'm talking about, because I think it does mean UH having a system in which there's a more vibrant private economy with true competition and UH corporations that are able to UH compete with global counterparts and be modern. And it's I think it's not happening sufficiently at this point, and to me that the challenge for them is to find a way to have a more vibrant, vigorous, dynamic

private sector. David, are we seeing direct private investment in Russia today? Just give us a sense of our companies, Western companies investing in Russia. I think it's modest and more modest than before the the UH conflict in Ukraine, which led to sanctions and great hesitancy on the part of untry companies from a number of Western countries uneasy about their part participation. David Lipton, thank you so much.

We look forward to all of us at Bloomberg to your meetings here in He's I'm gonna say this to the acting managing director do one more time as we truly celebrate the changing of the guard at the UH International Monetary Phone. Kristolini or gave A will take over as Managing director of course Frontline Economics from Bulgaria. Dr Lipton, thank you so much for joining Bloomberg Surveillance. Thanks for

listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio. It