Chapter 1: What is the main topic discussed in this episode?
Hello and welcome. This is The Michelle Hussein Show. I'm Michelle Hussein. I speak with people like Elon Musk. I think I've done enough. And Shonda Rhimes. That's so cute. This will be a place where every weekend you can count on one essential conversation to help make sense of the world.
So please join me, listen and subscribe to The Michelle Hussein Show from Bloomberg Weekend, wherever you get your podcasts. You certainly ask interesting questions. Bloomberg Audio Studios. Podcasts. Radio. News. Thank you so much, Matt. I am here with Kristalina Giergeva, the Managing Director of the International Monetary Fund at a time when the world leaders are all coming together.
We spoke back in spring and you seemed just a little bit more concerned. So did everybody here. There seems to be a 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 acting responsibly towards their own interests and the interests of the world. Let me unpack this. 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 tariffs were 23%. Today, US tariffs nominally 17.5%, but what is being collected is somewhere around 9%. 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 191 members. 188 of them decided to trade by the rules that exist. And the third very interesting thing is you now see the value of strong fundamentals.
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Chapter 2: What is the current economic situation in Argentina?
Countries have built good institutions, they have built good policies, especially in the emerging world. Now we are seeing the payback from that investment.
So is this the reason why you think that it's legitimate for the market to be looking through some of the recent flare-up in tensions between the U.S. 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 calmer, even if China-U.S. 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 the European Union.
If these recipients of Chinese goods feel the heat and decide that they too should impose tariffs, 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 their economies.
Chapter 3: How has global inflation affected economic growth?
You talk about emerging markets and the resilience that we've seen there. You talk about the potential lack of resilience in the developed world because of the fiscal overhang. Are you starting to see EM-like dynamics in the developed world?
When we look at the prospects for the world economy, they're underwhelming. Growth is slow, debt is high. And who leads on the debt front? Advanced economies. They have borrowed to meet the needs of people during COVID, when we had the shock from Russia's war in Ukraine. Now they need to pull back what they're providing as support, and it is very difficult. People like receiving.
They don't like losing what they have got. So we see everybody recognizing that debt needs to go down, that fiscal consolidation needs to take place. Here in the United States, Secretary Besant says we need to get to 3% 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 3% deficit next year. So there are some bright spots. Greece is a fantastic story. There are some bright spots, but still bright spots on a dark horizon.
Well, 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 debasement 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.
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Chapter 4: What factors contributed to the recent optimism in the global economy?
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 dollar in reserves globally has gone down somewhat, mostly because other countries have presented a good alternative. But they are all medium-sized countries. Australia, Sweden, Switzerland.
Even Eurozone is not that big to present an alternative to the dollar. And we need to remember, people go for the dollar 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, as the world becomes multipolar, it is likely to see this trend, but it is a slow, slow, slow process.
I also want to ask you about Argentina. The U.S. recently had this $20 billion swap line. How is the 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 their 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 4.5% this year.
And this is slower than last year. Inflation from triple digits down to 28%. Deficit gone. Instead of it, there 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 Javier Millet 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 in Argentina for getting 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.
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Chapter 5: How are countries responding to U.S. tariff policies?
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