Kristalina Georgieva, IMF It is so important in this world that we all do our part. And frankly, a more shock-prone world means we need each other.
Linda Lacina, Meet The Leader Welcome to Meet the Leader, the podcast where top leaders share how they are tackling the world's toughest challenges.
Today, we talk to Kristalina Georgieva, the managing director of the International Monetary Fund. She'll help us make sense of what's ahead for the global economy in the near term, and what leaders should pay attention to now.
Subscribe to Meet the Leader on Apple, Spotify, and wherever you get your favorite podcasts. And don't forget to rate and review us. I'm Linda Lacina. From the World Economic Forum and this is Meet the Leader.
Kristalina Georgieva, IMF Richer countries are doing much better than poor countries. This divergence matters not only to the people impacted. It matters to all of us because it undermines global security.
Linda Lacina, Meet The Leader What's next for the economy is always a big topic of debate, especially at our Annual Meeting in Davos. 2024 brings with it a special cocktail of challenges, from economic headwinds to geopolitical strife, to both the excitement and looming uncertainty of just how AI is going to transform businesses and jobs.
It's a rocky combination. In fact, half of the economists surveyed in our Chief Economist Outlook this year anticipate that the global economy is going to weaken.
This latest edition of the Chief Economists Outlook launched amid protracted weakness in global economic conditions and widening regional divergences. Image: World Economic Forum
For more context, however, we go to Kristalina Georgieva. She is the managing director of the International Monetary Fund, or the IMF. And I had the chance to catch up with her in the Congress Centre in Davos, the nerve centre of the meeting.
She shared with me her take what could unfold and, critically, what leaders should be paying attention to.
She also took me through the findings of the IMF's new report: Gen AI: Artificial Intelligence and the Future of Work. She shared how technologies will impact the labor market and how we can better tap its potential.
We will get into all of that. But first we'll get her take on the health of the global economy and what leaders should be considering in 2024.
Kristalina Georgieva, IMF 2024 is going to be a year where monetary policy has to finish its job and fiscal policy has to stop delivering buffers for shocks to come in the future. In other words: difficult year. But we expect growth at around 3%. And we also expect that the economy would be well poised for a soft landing.
“2024 is going to be a year where monetary policy has to finish its job.
” — Kristalina Georgieva, Managing Director, International Monetary FundWhat I would stress at the start of the year is what we learned from 2020 onwards is: Think of the unthinkable. Expect the unexpected. So we have to really watch carefully how the world evolves and recognize that this is a year where half of the population is going to go to the polls. Very difficult to then have the fiscal authorities tightening so they can have the resources their countries, their people, need for the future.
Linda Lacina, Meet The Leader So the IMF has said that the global inflation rate is projected to be at 5.8% in 2024. Now, what sort of challenges could this bring, either economically or politically? And what should people be keeping in mind to navigate that?
Kristalina Georgieva, IMF The rate is going down on average. And what we now have is a very diverse, range. In some countries the job is already done. Inflation is low enough for them to have an accommodative monetary policy. Brazil is one example. In Asia, many countries do not have an inflation problem. And Japan did not -- or China -- they did not have an inflation problem to begin with. In fact, in China there is a bit of worry about disinflation, although we don't think that is necessarily a high priority concern.
When we look at the advanced economies -- good news on the economic front translates into bad news on the fight against inflation because we as see in the United States, for example, very tight labor market and wages are now going above inflation. What does it mean? People have more money to spend. When they spend more, that puts pressure on prices upwards. So last mile -- very, very, very tricky. Central banks should not tighten prematurely because then they may lose the victory that is now in their hands. But if they are too slow, then they throw cold water on the economy.
So, that average number, 5.88, is so many different numbers in so many different places. What does it mean for central bankers? Don't rely on looking at what others are doing because you should focus on the data in your country. Do what is right for you.
Some economies have greater shares of occupations that have high-exposure to AI and this will shape the impact the technology will bring Image: International Monetary Fund Kristalina Georgieva, IMF When we look at the risks, there are three that I want to highlight. The first one is we are not prepared in so many places. It is already upon us and yet we don't even understand the impact it is going to have on labor markets. Neither what we need to do to prepare.
Two: Inequality. When we look at the impact on jobs. Some jobs would actually become more productive and they will be renumerated better. Capital is going to see higher return, but many jobs would evaporate, or they would be such low paying jobs that they actually make lives of people harder. If we don't have policies to help people adapt to this new world, if we don't have social protection in place, and especially social safety roles and retraining programs, then inequality that is already high in the world would get even higher.
The third, risk is information. Impact on information. Disinformation is already top of mind, concern here in Davos. And unchecked artificial intelligence can make this problem much, much worse.
Linda Lacina, Meet The Leader And to give us the other part of that balance, can you talk a little bit about the opportunities that strike you?
Kristalina Georgieva, IMF Number one is increasing productivity. We see sluggish growth year after year after year. 2% last year. 3% this year. 3% year after. That is not enough. If you compare historically before the pandemic, the annual average of the decade ending 2019 was 3.8%. If we capture the benefits of what could be a new industrial revolution, and it translates into a boost of productivity, that would be such welcoming news, for the world.
“If we capture the benefits of what could be a new industrial revolution, and it translates into a boost of productivity, that would be such welcoming news, for the world.
” — Kristalina Georgieva, Managing Director, International Monetary Fund
Second. It is going to make jobs for many humans better, and the quality is going to go up. We already see it in medicine. We see it in education. And that is a tremendous advantage.
And third, if we handle properly the distributional impact, we actually can see everybody doing better in the world of artificial intelligence. In other words, a richer, more prosperous world.
Linda Lacina, Meet The Leader Your report mentions that AI will impact economies in a lot of different ways. What is your advice for leaders who are taking these insights forward.
Kristalina Georgieva, IMF Pay attention to the data. We have ranked 125 countries on their level of preparedness based on four criteria: First, digital infrastructure; Second, human capital and labor markets; Third, innovation and how it translates into business opportunities; Fourth, regulation and ethics.
And when you look at the accordion of countries at the top, very well-prepared: Singapore, then United States, Denmark, Germany. At the bottom, all low level income countries. Low income countries are dramatically worse off.
One can say jobs there would be less impacted. We expect some 26% of jobs to be impacted. Why? Because they don't have that many cognitive jobs. But that also means, possibly an opportunity lost. And, when you talk about inequality, I must stress it is not just within countries. It is also inequality across countries. Since the pandemic, we have seen a dangerous divergence: richer countries doing much better than poor countries. This divergence matters not only to the people impacted. It matters to all of us because it undermines global security.
Linda Lacina, Meet The Leader With all of these risks and opportunities, what keeps you up at night?
Kristalina Georgieva, IMF The unthinkable. When I reflect on the last couple of years, nobody expected the pandemic to put the world economy to a stop. Nobody expected Russia to invade Ukraine. Nobody expected that a long history of very low inflation, very low interest rates would be abruptly interrupted.
What I want is a world that is better prepared and that preparedness actually goes straight in our alley. We want countries to have sound macroeconomic and financial policies. Buffers, so when a shock comes, they can withstand it. And we also want a world where institutions like mine, the IMF, we are a force for good. We are a source of a stability.
I am very proud our membership increased our financial capacity significantly -- 50% increase in quarters -- massive increase in our lending capacity for low income countries and for climate, countries that are on the frontline of climate change.
It is so important in this world that we all do our part. And frankly, a more shock prone world means we need each other, Strength in unity.
“It is so important in this world that we all do our part. And frankly, a more shock-prone world means we need each other.
” — Kristalina Georgieva, Managing Director, International Monetary FundLinda Lacina, Meet The Leader And of course, I have to ask, what gives you hope?
Kristalina Georgieva, IMF I I'm going to cite somebody who I admire, John Maynard Keynes. In 1930, Keynes wrote an essay called Economic Possibilities for Our Grandchildren. And there he predicted that in hundred years the world economy would massively expand and technological transformation would make the lives of people better. And we have seen this happening.
Keynes also said in this year, remember, this is in the in the depth of the depression, he said there are two types of pessimists that we need to counter: reactionary pessimists - they think that it is so precarious, don't touch, keep it as it is. And revolutionary pessimists - Oh, it's so bad. We have to, destroy what we have.
We see these forces around us today. And what gives me hope is that Keynes was right 100 years ago. I'm a diehard optimist. I think we will see the world using technology and collaboration, despite all the tensions, despite the fragmentation, to bring a better future for our grandchildren.
Linda Lacina, Meet The Leader That was Kristalina Georgieva. Thanks so much to her. And thanks so much to you for listening.
A transcript of this episode and my colleagues episodes of Radio Davos are available at wef.ch/podcasts.
This episode of Meet the Leader was presented and produced by me, with Taz Kelleher as editor and Gareth Nolan driving studio production.
That's it for now. I'm Linda Lacina with the World Economic Forum. Have a great day.
