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