Question: The Chinese economy is estimated to have grown at 2.3 percent in 2020 and it's projected to continue to recover this year with an expected growth of 8.1 percent. What are the key factors for China's robust recovery? And looking ahead, how does China’s recovery path look like?
Gita Gopinath: So, China has been very successful in containing the pandemic and that has played a very important role to bring back activity much more quickly. There's been effective policy support provided both in terms of fiscal policy and monetary policy, and China's exports have also gone up in this environment. So, all of these factors are responsible for China doing as well. It is as it has. And indeed, like we said, it is one of these economies that's returning back to the pre-pandemic projected level in the fourth quarter of 2020, well ahead of other major economies. I'd like to see if my colleague Malhar would like to come in and add a few points.
Malhar Naber: Thanks Gita. Yeah, just to reinforce the point that you raised on policy support. That's been a big driver of the impressive rebound in China in 2020, the public infrastructure spending support and also the support that was extended to affected households and to firms reinforced by aggressive actions by the People's Bank of China to provide liquidity support and ensure that credit provision remains strong. Going forward, we see a gradual handoff to private sector activity starting out with a pickup in private investment activity. And that's, in fact, already been seen in the second half of last year. And we expect that to continue, but also increasingly shifting towards more private consumption-based growth. But in terms of securing that recovery path, it's vitally important to ensure that rebalancing towards private consumption continues and perhaps even is accelerated to an extent with efforts to strengthen the social safety net, which will help bring down precautionary savings among households in China, encourage them to spend more and to rotate the composition of growth more towards private consumption. Reinforcing that with structural reform efforts to deregulate certain key sectors, to bring in more private investment in those sectors, for example, in services, would also help secure the medium-term growth path. But overall, as you mentioned, Gita, very impressive recovery in 2020 after strong initial containment effort reinforced by aggressive policy support.
Question: On India, could you please explain your projection of 11.5 percent growth rate for India in 2021, 2022, which is higher than other institutions like the U.N. and the World Bank? What are the conditions for it to continue?
Gita Gopinath: So when we look at the India numbers, of course, you have to accumulate over the last two years, like 2020 and 2021, India is estimated to have had a contraction of around -8 percent for this 2021 fiscal year. And then we do have, as you said, a bounce back and growth to around 11 percent. But again, cumulatively, by the end of 2022, India is still 9 percent below its pre-pandemic projected level. So, we are seeing India come back to its 2019 levels in 2021, but it's still below. Why do we have these upgrades? We have the upgrade, one because activity and mobility particularly came back much faster than expected in India. We have not seen another wave [of the virus]. In fact, we are seeing a very strong decline in cases, which is, again, a bit different from other parts of the world. And so these factors, including what we're seeing in terms of high frequency indicators, point to a somewhat faster pace of recovery. But again, there is still some distance to go.
Question: Latin America was one of the regions most affected by the pandemic and the economic crisis. Which countries will be recovering first? And is there a risk for another lost decade? Can you please describe the risks for the recovery in Latin America? And specifically, how does the situation in Argentina impact the outlook for the region?
Gita Gopinath: So indeed, Latin America was particularly hard hit by the pandemic. If you look at the number of cases per million, deaths per million, it's been a pretty difficult time for Latin America and for the region as a whole, we saw a severe contraction, but again, that was less severe than we had expected in October because of stronger recoveries when you saw the activity started coming back up when countries were reopening from their lockdown. What we do have is a very differing speeds of recoveries and also different levels of contraction that countries have—there are big differences between Brazil and Mexico. Many factors play a role, including the amount of policy support that was deployed, a lot of fiscal policy support that was provided. These are challenging times for Latin America. Now, to the extent that we see a return in growth in the global economy and including its main trading partners, including the U.S., we should see that having positive spillovers to the Latin America region. But, until this pandemic is over, the risks remain very high. There are still a large number of cases in the area. There are new strains that are being found in different parts of the world. And we know vaccinations have rolled out, but I think in many parts of the world, the vaccinations are not just happening at a fast enough pace. So, you know, these are important factors that make the outlook remain uncertain. I don't know if Petya wants to add anything on Latin America.
Petya Koeva Brooks: Just to add that across the region, we've also seen some countries being ahead of others in terms of securing vaccines and starting that process of vaccination. So here countries such as Chile and Mexico and Costa Rica stand out. So, again, going back to our recommendation on how to make this recovery appear and strengthen as much as possible, going that route in terms of the health response is the first order of business.
Question: Did you evaluate the potential impact of the rescue plan of 1.9 trillion dollars unveiled by the new American president, Joe Biden, both on the U.S. growth and on global growth?
Gita Gopinath: These are still early days. We have what I would describe as a very preliminary estimate at this point of the impact on the U.S. economy and not for the world at this point. For the U.S. economy, we have that this can raise output in the U.S. by 5 percent over three years. That's what we have in terms of our estimate, including increasing growth this year by 1 and a quarter percent. But again, just to be very clear, this is all still preliminary. Many things are still being worked out at this point, but this is what we have as a first estimate.
Question: With the new variant of the virus now being found in some African countries where hope for access of vaccine is still weak, will the IMF be stepping up to help these countries?
Gita Gopinath We are flagging this. This is a very important concern. The one of the reasons we are having this diverging recoveries is because of the [unequal] access to vaccines that we are seeing around the world. Now, there are advanced economies and some emerging and developing economies that are expected to get to, you know, widespread vaccine coverage in the second half of this year. But then there are many countries that are waiting until 2022 for that to happen. And that's just costly and it's costly for everybody, it's costly not just for developing countries, but it's very costly for the countries that have the vaccines, too. Which is why we are calling on greater funding for making sure these vaccines are available to poorer nations, also, including the funding of logistics to make them delivered and to have actual vaccine uptake. This is a very important priority. Funding COVAX is very important. The fact that the U.S. has re-joined the WhO and is, you know, promising to provide money to COVAX, I think is a very big step in that direction. But much more will be needed because as we can see, given the mutating virus, that this is not a problem that's going away anytime soon.
Question: What are the IMF expectations for MENA's economic outlook in 2021 and 2022? And how does the IMF see the debt crisis in the region in 2021? And which policies does it propose to manage in the region?
Gita Gopinath: Again, in the case of MENA too, like many other regions of the world, there are different pieces of a recovery. What we've seen in in general is in terms of the impact on growth, it was more negative for oil exporting nations relative to the ones that are not. But again, we also found that the effect on oil exporters is not as negative as we might have projected last time around, because in these economies like Saudi Arabia, for instance, we've seen non-oil activity return back much more strongly. Now, again, there's great differences. There are fragile states. There is you know, we have Lebanon, which has very high financing needs. And cross -border tourism isn't returning anytime soon, which has implications for countries that rely on tourism. So there are many different diverse parts of recovery here. And again, let me bring in Petya to add anything.
Patya Koeva Brooks: Thank you, Gita. Just to add that, as in other regions, we do have that divergent path also because of access and actions taken on the vaccination front. And here is where countries such as those in the Gulf region have been ahead of others and securing somewhat diversified sources of vaccine. And so making sure that access to vaccine reaches everyone in the region is something very important going forward.
Raphael Anspach: On the update, the IMF has increased the GDP projections for Mexico in 2021. Can you please explain if that means that the economy is on a path for recovery? In case yes, what are the sectors that are going to be boosting that development?
Gita Gopinath: What we're seeing in Mexico is a two-speed recovery. So, what we're seeing is that the growth is coming from external demand with an increase in exports, while, on the other hand, domestic demand remains subdued. And so that's playing out in the numbers. And, of course, depending upon what happens in the U.S. this year in terms of additional support plans, that could be an upside risk for Mexico. But if you look at the cumulative effect between 2020 and 2021 on the recovery, you can see that this is still well below 2019 levels and it will take some more time, at least until 2022 or later, to get back to the pre-covid levels. So that's what we have for Mexico at this point.
Question: Do you think that the impact of the supply chain interruptions to goods production, combined with the ongoing monetary stimulus, could create inflationary pressures?
Gita Gopinath: Again, the answer depends upon the country we are talking about. But for many advanced economies as we see it, there is still a fair amount of slack. Employment rates, labor force participation rates are still below their pre pandemic level. We're still in the midst of the crisis and inflation expectations are still well anchored. Again, there's a difference here between the US and the Euro-area. In the Euro-area the concern is about inflation drifting too low. And in the U.S., we have in terms of our predictions for core inflation, it still is slightly below or around the two percent target. So, we don't expect to see, a runaway inflation in these countries and also in terms of global supply chains and the effect that might have. If you look at the facts, merchandise trade has returned back to pre-pandemic levels, and this is much faster than during the global financial crisis. And so, we don't really see dramatic breakdown of global supply chains around the world as of now. I mean, trade is still weak in services, but in goods trade, we are seeing we've seen a strong recovery.
Raphael Anspach: Thanks very much, Gita. I see that we don't have any additional questions here. And again, my apologies for the colleagues following us online for the hiccup with the WebEx. I'm going to ask Gita, Petya and Malhar, if they have any closing words about the outlook and the policy priorities before we close the press conference.
Gita Gopinath: Thank you, Raphael. I mean, just to reiterate what I said at the start, which is that we are living in a highly uncertain times. We are projecting the world would grow this year as opposed to a severe collapse last year, but there is uncertainty. A lot depends upon the outcome of this race between a mutating virus and vaccines, and how much policy support can hold up. And what we are seeing is divergence and prospects across countries. Emerging and developing nations are projected to have greater output losses relative to their pre pandemic projected levels as compared to advanced economies. And this doesn't have to be this way. It can be arrested. It can be reversed. That would require more broad spread, a broad access to vaccines, and not just that and vaccinations, which is getting the logistics done too, and therapies to end this health crisis everywhere. It's important for countries that don't have the financial access that some other countries do, that they receive support from the international community in terms of concessional financing, in terms of grants, aides, [and] in some cases, outright debt restructuring. So, there is still much, much to be done. But we're certainly at least in positive growth territory this year as opposed to last year.
Raphael Anspach: With that, if there are no other comments, I'm going to close this press conference again, thanking our speakers for today, Gita Gopinath, Petya Koeva Brooks, Malhar Nabar, and every one of you who has followed us online. And again, our apologies for the technical problems that we've experienced. Stay safe, stay well, and see you soon. Thank you.
Gita Gopinath: So, China has been very successful in containing the pandemic and that has played a very important role to bring back activity much more quickly. There's been effective policy support provided both in terms of fiscal policy and monetary policy, and China's exports have also gone up in this environment. So, all of these factors are responsible for China doing as well. It is as it has. And indeed, like we said, it is one of these economies that's returning back to the pre-pandemic projected level in the fourth quarter of 2020, well ahead of other major economies. I'd like to see if my colleague Malhar would like to come in and add a few points.
Malhar Naber: Thanks Gita. Yeah, just to reinforce the point that you raised on policy support. That's been a big driver of the impressive rebound in China in 2020, the public infrastructure spending support and also the support that was extended to affected households and to firms reinforced by aggressive actions by the People's Bank of China to provide liquidity support and ensure that credit provision remains strong. Going forward, we see a gradual handoff to private sector activity starting out with a pickup in private investment activity. And that's, in fact, already been seen in the second half of last year. And we expect that to continue, but also increasingly shifting towards more private consumption-based growth. But in terms of securing that recovery path, it's vitally important to ensure that rebalancing towards private consumption continues and perhaps even is accelerated to an extent with efforts to strengthen the social safety net, which will help bring down precautionary savings among households in China, encourage them to spend more and to rotate the composition of growth more towards private consumption. Reinforcing that with structural reform efforts to deregulate certain key sectors, to bring in more private investment in those sectors, for example, in services, would also help secure the medium-term growth path. But overall, as you mentioned, Gita, very impressive recovery in 2020 after strong initial containment effort reinforced by aggressive policy support.
Question: On India, could you please explain your projection of 11.5 percent growth rate for India in 2021, 2022, which is higher than other institutions like the U.N. and the World Bank? What are the conditions for it to continue?
Gita Gopinath: So when we look at the India numbers, of course, you have to accumulate over the last two years, like 2020 and 2021, India is estimated to have had a contraction of around -8 percent for this 2021 fiscal year. And then we do have, as you said, a bounce back and growth to around 11 percent. But again, cumulatively, by the end of 2022, India is still 9 percent below its pre-pandemic projected level. So, we are seeing India come back to its 2019 levels in 2021, but it's still below. Why do we have these upgrades? We have the upgrade, one because activity and mobility particularly came back much faster than expected in India. We have not seen another wave [of the virus]. In fact, we are seeing a very strong decline in cases, which is, again, a bit different from other parts of the world. And so these factors, including what we're seeing in terms of high frequency indicators, point to a somewhat faster pace of recovery. But again, there is still some distance to go.
Question: Latin America was one of the regions most affected by the pandemic and the economic crisis. Which countries will be recovering first? And is there a risk for another lost decade? Can you please describe the risks for the recovery in Latin America? And specifically, how does the situation in Argentina impact the outlook for the region?
Gita Gopinath: So indeed, Latin America was particularly hard hit by the pandemic. If you look at the number of cases per million, deaths per million, it's been a pretty difficult time for Latin America and for the region as a whole, we saw a severe contraction, but again, that was less severe than we had expected in October because of stronger recoveries when you saw the activity started coming back up when countries were reopening from their lockdown. What we do have is a very differing speeds of recoveries and also different levels of contraction that countries have—there are big differences between Brazil and Mexico. Many factors play a role, including the amount of policy support that was deployed, a lot of fiscal policy support that was provided. These are challenging times for Latin America. Now, to the extent that we see a return in growth in the global economy and including its main trading partners, including the U.S., we should see that having positive spillovers to the Latin America region. But, until this pandemic is over, the risks remain very high. There are still a large number of cases in the area. There are new strains that are being found in different parts of the world. And we know vaccinations have rolled out, but I think in many parts of the world, the vaccinations are not just happening at a fast enough pace. So, you know, these are important factors that make the outlook remain uncertain. I don't know if Petya wants to add anything on Latin America.
Petya Koeva Brooks: Just to add that across the region, we've also seen some countries being ahead of others in terms of securing vaccines and starting that process of vaccination. So here countries such as Chile and Mexico and Costa Rica stand out. So, again, going back to our recommendation on how to make this recovery appear and strengthen as much as possible, going that route in terms of the health response is the first order of business.
Question: Did you evaluate the potential impact of the rescue plan of 1.9 trillion dollars unveiled by the new American president, Joe Biden, both on the U.S. growth and on global growth?
Gita Gopinath: These are still early days. We have what I would describe as a very preliminary estimate at this point of the impact on the U.S. economy and not for the world at this point. For the U.S. economy, we have that this can raise output in the U.S. by 5 percent over three years. That's what we have in terms of our estimate, including increasing growth this year by 1 and a quarter percent. But again, just to be very clear, this is all still preliminary. Many things are still being worked out at this point, but this is what we have as a first estimate.
Question: With the new variant of the virus now being found in some African countries where hope for access of vaccine is still weak, will the IMF be stepping up to help these countries?
Gita Gopinath We are flagging this. This is a very important concern. The one of the reasons we are having this diverging recoveries is because of the [unequal] access to vaccines that we are seeing around the world. Now, there are advanced economies and some emerging and developing economies that are expected to get to, you know, widespread vaccine coverage in the second half of this year. But then there are many countries that are waiting until 2022 for that to happen. And that's just costly and it's costly for everybody, it's costly not just for developing countries, but it's very costly for the countries that have the vaccines, too. Which is why we are calling on greater funding for making sure these vaccines are available to poorer nations, also, including the funding of logistics to make them delivered and to have actual vaccine uptake. This is a very important priority. Funding COVAX is very important. The fact that the U.S. has re-joined the WhO and is, you know, promising to provide money to COVAX, I think is a very big step in that direction. But much more will be needed because as we can see, given the mutating virus, that this is not a problem that's going away anytime soon.
Question: What are the IMF expectations for MENA's economic outlook in 2021 and 2022? And how does the IMF see the debt crisis in the region in 2021? And which policies does it propose to manage in the region?
Gita Gopinath: Again, in the case of MENA too, like many other regions of the world, there are different pieces of a recovery. What we've seen in in general is in terms of the impact on growth, it was more negative for oil exporting nations relative to the ones that are not. But again, we also found that the effect on oil exporters is not as negative as we might have projected last time around, because in these economies like Saudi Arabia, for instance, we've seen non-oil activity return back much more strongly. Now, again, there's great differences. There are fragile states. There is you know, we have Lebanon, which has very high financing needs. And cross -border tourism isn't returning anytime soon, which has implications for countries that rely on tourism. So there are many different diverse parts of recovery here. And again, let me bring in Petya to add anything.
Patya Koeva Brooks: Thank you, Gita. Just to add that, as in other regions, we do have that divergent path also because of access and actions taken on the vaccination front. And here is where countries such as those in the Gulf region have been ahead of others and securing somewhat diversified sources of vaccine. And so making sure that access to vaccine reaches everyone in the region is something very important going forward.
Raphael Anspach: On the update, the IMF has increased the GDP projections for Mexico in 2021. Can you please explain if that means that the economy is on a path for recovery? In case yes, what are the sectors that are going to be boosting that development?
Gita Gopinath: What we're seeing in Mexico is a two-speed recovery. So, what we're seeing is that the growth is coming from external demand with an increase in exports, while, on the other hand, domestic demand remains subdued. And so that's playing out in the numbers. And, of course, depending upon what happens in the U.S. this year in terms of additional support plans, that could be an upside risk for Mexico. But if you look at the cumulative effect between 2020 and 2021 on the recovery, you can see that this is still well below 2019 levels and it will take some more time, at least until 2022 or later, to get back to the pre-covid levels. So that's what we have for Mexico at this point.
Question: Do you think that the impact of the supply chain interruptions to goods production, combined with the ongoing monetary stimulus, could create inflationary pressures?
Gita Gopinath: Again, the answer depends upon the country we are talking about. But for many advanced economies as we see it, there is still a fair amount of slack. Employment rates, labor force participation rates are still below their pre pandemic level. We're still in the midst of the crisis and inflation expectations are still well anchored. Again, there's a difference here between the US and the Euro-area. In the Euro-area the concern is about inflation drifting too low. And in the U.S., we have in terms of our predictions for core inflation, it still is slightly below or around the two percent target. So, we don't expect to see, a runaway inflation in these countries and also in terms of global supply chains and the effect that might have. If you look at the facts, merchandise trade has returned back to pre-pandemic levels, and this is much faster than during the global financial crisis. And so, we don't really see dramatic breakdown of global supply chains around the world as of now. I mean, trade is still weak in services, but in goods trade, we are seeing we've seen a strong recovery.
Raphael Anspach: Thanks very much, Gita. I see that we don't have any additional questions here. And again, my apologies for the colleagues following us online for the hiccup with the WebEx. I'm going to ask Gita, Petya and Malhar, if they have any closing words about the outlook and the policy priorities before we close the press conference.
Gita Gopinath: Thank you, Raphael. I mean, just to reiterate what I said at the start, which is that we are living in a highly uncertain times. We are projecting the world would grow this year as opposed to a severe collapse last year, but there is uncertainty. A lot depends upon the outcome of this race between a mutating virus and vaccines, and how much policy support can hold up. And what we are seeing is divergence and prospects across countries. Emerging and developing nations are projected to have greater output losses relative to their pre pandemic projected levels as compared to advanced economies. And this doesn't have to be this way. It can be arrested. It can be reversed. That would require more broad spread, a broad access to vaccines, and not just that and vaccinations, which is getting the logistics done too, and therapies to end this health crisis everywhere. It's important for countries that don't have the financial access that some other countries do, that they receive support from the international community in terms of concessional financing, in terms of grants, aides, [and] in some cases, outright debt restructuring. So, there is still much, much to be done. But we're certainly at least in positive growth territory this year as opposed to last year.
Raphael Anspach: With that, if there are no other comments, I'm going to close this press conference again, thanking our speakers for today, Gita Gopinath, Petya Koeva Brooks, Malhar Nabar, and every one of you who has followed us online. And again, our apologies for the technical problems that we've experienced. Stay safe, stay well, and see you soon. Thank you.
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