WE WERE ON A PANEL TOGETHER TODAY TALKING ABOUT FISCAL, AND
YOU SEEM A BIT MORE OPTIMISTIC THAN A COUPLE OF MONTHS AGO.
OVERALL, ARE YOU LEANING TOWARDS A BETTER FORECAST FOR
THE WORLD ECONOMY THIS YEAR? GITA:
IT IS A PLEASURE TO JOIN YOU. IN TERMS OF THE OVERALL
FORECAST , IT WILL BE IN THE BALLPARK OF WHAT WE SAW IN
OCTOBER. THE POSITIVE WAVE TO THINK
ABOUT IT IS AFTER GOING THROUGH THREE ROUNDS OF DOWNGRADES, AT
LEAST WE DO NOT HAVE A WORSE OUTCOME WE ARE LOOKING AT THIS
TIME AROUND. THE POSITIVE NEWS IS WHERE WE
HAVE GLOBAL GROWTH APPS THIS YEAR, IT IMPROVES TOWARD THE
SECOND HALF OF THIS YEAR. THAT IS BECAUSE WE ARE SEEING
SIGNS OF RESILIENCE. WE HAVE CHINA THAT HAS LIFTED
THE ZERO COVID POLICY, SO WE ARE GOING TO SEE SOME
IMPROVEMENTS TOWARD THE END OF THE YEAR.
AGAIN, THIS IS STILL A TOUGH YEAR. FRANCINE:
DO YOU THINK INFLATION HAS PEAKED?
IF IT HAS PEAKED, DOES THAT MAKE IT EASIER FOR THE SECOND
HALF? GITA:
OUR EXPECTATION IS THAT HEADLINE INFLATION HAS PEAKED,
BUT WHEN IT COMES TO THE MORE STICKY COMPONENTS OF INFLATION,
WHICH IS THE SERVICES SECTOR INFLATION, THERE ARE COUNTRIES
WHERE THAT IS STILL TRENDING UP. IN THE U.S., WE SEE SIGNS OF IT
SLOWING, BUT WE WILL HAVE TO WAIT FOR A FEW MORE MONTHS OF
THE KIND OF DATA WE SAW OUT OF THE U.S.
TO START THINKING THAT WE SHOULD BE ON THE PATH TOWARD
THE 2% TARGET. MONETARY POLICY WILL HAVE TO
STAY THE COURSE THROUGH 2023. FRANCINE:
HOW ARE YOU EXPECTING THE CHINA REOPENING TO GO AHEAD?
TODAY WE ALSO HAVE JANET YELLEN MEETING WITH THE VICE SECRETARY
OF CHINA IN ZURICH. DOES THAT HELP THE WORLD
ECONOMY? GITA: THE CHINA REOPENING LITERALLY
MEANS THEY WILL TRACK DIFFERENT PATHS OF THE WORLD AFTER BEING
SHUT OUT A COUPLE OF YEARS. THAT WILL INCREASE THE MOBILITY
AND WE EXPECT TO SEE CHINA'S GROWTH RECOVERED THIS YEAR, AND
THAT HAS POSITIVE SPILLOVERS FOR THE REST OF THE WORLD.
WE SEE MORE ENGAGEMENT BETWEEN THE U.S. AND CHINA.
ONE IMPORTANT MEETING IS WHAT HAPPENED AT THE MEETING IN BALI
BETWEEN PRESIDENT BIDEN AND PRESIDENT XI JINPING.
THESE MEETINGS ARE CRITICAL. THESE ARE THE TWO LARGEST
ECONOMIES OF THE WORLD. FRANCINE:
HOW WORRIED ARE YOU ABOUT THE U.S. DEBT CEILING? GITA:
IT SHOULD NOT BE SOMETHING WE ARE EVEN SECOND GUESSING AT
THIS POINT. THE U.S.
HAS THE HIGHEST INVESTMENT GRADE RATING IN THE WORLD.
THERE IS ALREADY ENOUGH UNCERTAINTY, ENOUGH RISKS TO
DEAL WITH. THIS SHOULD NOT BE AN ADDITIONAL RISK THAT THE U.S.
OR THE WORLD SHOULD HAVE. FRANCINE:
IS IT THAT WE COULD SEE A DEBT CEILING -- IT COULD BE
DIFFICULT TO GET THROUGH AND WE COULD SEE THE U.S.
BEING DOWNGRADED? GITA: THERE IS CERTAINLY A RISK TO IT.
GIVEN THE DYNAMICS WE HAVE IN THE U.S.
CONGRESS, THERE WILL CERTAINLY BE TENSIONS AROUND IT, BUT I
HOPE THEY GET THE JOB DONE AND DO THE RIGHT THING.
MOVE THE DEBT CEILING, DO WHAT IS NEEDED, TO MAKE SURE THIS IS
NOT THE COURTS. FRANCINE: YOU FOCUS A LOT OF YOUR ENERGY
ON TALKING ABOUT FRAGMENTATION OF THE PITFALLS OF THAT.
ARE WE SEEING A MORE FRAGMENTED WORLD THAN WE DID LAST YEAR?
GITA: THE WORLD HAS BEEN MOVING TOWARDS FRAGMENTATION THE LAST
FEW YEARS. IT STARTED WITH THE U.S.-CHINA
TRADE TENSIONS BEFORE THE PANDEMIC.
NOW YOU HAD THE PANDEMIC, THE WAR. EVERYONE IS CONCERNED ABOUT
ECONOMIC AND NATIONAL SECURITY. IT IS IMPORTANT FOR COUNTRIES
TO BUILD RESILIENCE, BUT WE ARE ALSO SEEING THAT AS IN SHORING,
BRINGING PRODUCTION BACK HOME. IF WE MOVE IN THAT DIRECTION,
IT WILL BE COSTLY FOR HOUSEHOLDS AND INDUSTRIES.
FRANCINE: WE HAVE SEEN VOLATILITY BECAUSE
OF WHAT THE BOJ DID OR DID NOT PUT IN PLACE.
DO SUPPORT THOSE MOVES? GITA: THE BANK OF JAPAN HAS A
POSITION TO DEAL WITH. THEY HAVE INFLATION GOING UP,
BUT THE RISK OF INFLATION SLIDING BACK WELL BELOW THE
TARGET REMAINS HIGH. THEY HAVE TO DO THIS COMPLEX
TRADE-OFF OF KEEPING MONETARY POLICY ACCOMMODATIVE WHILE
ASSURING IT IS CONSISTENT WITH THE INFLATION DATA COMING OUT.
WE HAVE A MISSION IN JAPAN RIGHT NOW ON THE GROUND, A
REPORT COMING OUT OF JAPAN RELATIVELY SOON. FRANCINE:
COMING BACK TO CHINA, THERE ARE A NUMBER OF COUNTRIES WHO
BELIEVE THERE IS RELIEF IN THE COMMON FRAMEWORK BID IS CHINA
BEING MORE HELPFUL, AND DOES THIS GIVE YOU HOPE THAT THE
WORLD WILL BE LESS FRAGMENTED? GITA:
CHINA BEING PART OF THE COMMON FRAMEWORK IS VERY IMPORTANT
SOLVING DEBT ISSUES AROUND THE WORLD.
WE HAD ONE SUCCESS, AND THAT WAS CHAD.
IT'S GOT FULLY CONCLUDED WITH A MEMORANDUM OF UNDERSTANDING IN
MID-DECEMBER.
THIS IS THE FIRST TIME WE HAVE HAD THE PRIVATE SECTOR COME
TOGETHER TO AGREE ON THE RESTRUCTURING, SO THAT IS A
GOOD OUTCOME. BUT THE PROGRESS IS VERY SLOW.
OTHER COUNTRIES NEED HELP, SO WE ARE PUSHING ALL CREDITORS
INCLUDING CHINA TO STEP UP FURTHER AND WORK WITH US FOR
SOLUTIONS. FRANCINE:
ZAMBIA AND GHANA ARE COMING UP. IS THAT THE TEST? GITA:
IT IS A TEST FOR THE COMMON FRAMEWORK TO SEE IF WE CAN
DELIVER.