Live on Bloomberg TV

00:00INTERNATIONAL MONETARY FUND MANAGING DIRECTOR. WE HAVE SO MUCH TO TALK ABOUT. YOU HAVE LOWERED FORECASTS IN THE MARKETS ARE IN A LIMBO STATE. IF YOU LOOK AT RISKS, WHAT ARE YOUR TOP THREE? > > THERE'S THIS UNCERTAINTY AT THE TOP OF THE LIST. IT CAN BECAUSE BY MANY FACTORS. TRADE TENSIONS WERE LAST YEAR'S NUMBER ONE. WE HAVE SEEN THAT FROM THE START OF THE YEAR, WE GOT CLIMATE SHOCKS IN AUSTRALIA WITH THE FIRES. WE HAD TENSIONS IN THE MIDDLE EAST AND NOW THERE IS CONCERN ABOUT THE VIRUS. WE HAVE TO RECOGNIZE THIS IS THE NEW NORMAL. WE ARE ALSO KEEN TO SEE GOVERNMENTS STEPPING UP ON THE POLICY FRONT. MONETARY POLICY HAS SERVICE WELL BUT CANNOT BE THE ONLY SAVIOR OF GLOBAL GROWTH. WE WANT TO SEE HOW THE CONSEQUENCES OF PROLONGED INTEREST RATES MAY PLAY OUT. HASLINDA: COMING INTO 2020, YOU TALKED ABOUT HOW THE GLOBAL ECONOMY IS IN A PRECARIOUS POSITION. GIVEN THE CORONAVIRUS IS IT POSSIBLE YOU HAVE TO RELOOK AT THE NUMBERS? > > LET ME FIRST SAY THAT AT THE START OF THE YEAR, WE ARE IN A BETTER PLACE THAN WE WERE IN OCTOBER WHEN PRECARIOUS WAS THE WORD WE USED. WHY ARE WE IN A BETTER PLACE? BECAUSE TRADE TENSIONS RECEDED WITH THE U.S. CHINA DEAL. MONETARY POLICY HAS DONE A DECENT JOB. WE HAVE 49 CENTRAL BANKS CUTTING INTEREST RATES 71 TIME IN A SYNCHRONIZED MANNER. THAT HAS BOOSTED GLOBAL GROWTH BY HALF A PERCENTAGE POINT. WE ALSO ARE SEEING SIGNS THAT TRADE AND INDUSTRIAL OUTPUT MAY BE BOTTOMING OUT. YOU'VE RIGHTLY SAID THAT WE HAVE DOWNGRADED OUR FORECAST. IT WAS REALLY TWO THINGS. INDIA THAT ABRUPTLY SLOWDOWN IN A COUPLE OF COUNTRIES EXPERIENCING UNREST. OVERALL, THE FORECAST FOR THE WORLD NOW IS A BIT BETTER THAN IT WAS IN OCTOBER. THIS BEING SAID, WE DO HAVE TO ACCEPT, IN A FAST WARMING WORLD THAT IS SO INTERCONNECTED, THAT WE ARE MORE SHOCK-PRONE. THEREFORE, A BIG TASK FOR BUSINESS GOVERNMENTS, AND CITIZENS IS TO ADJUST TO THAT NEW NORMAL. FRANCINE: COULD A MARKET CORRECTION PROVIDED SHOCK -- PROVIDE A SHOCK? > > WE DO NOT EXPECT ANYTHING ELSE WHEN WE HAVE PROLONGED TIMES OF LOW INTEREST RATES. WE DO SEE INVESTMENT IN EQUITY GOING UP. WHETHER OR NOT THIS IS A MOMENT WE MIGHT SEE SOME MOVEMENT IS TO BE SEEN NOT TO BE PREDICTED. I DON'T WANT TO TALK ABOUT IT ONE WAY OR THE OTHER. HASLINDA: WE ARE SEEING RECORD DEBT RIGHT NOW. AT WHAT POINT SHOULD CENTRAL BANKS BE CONCERNED? THE FED SAID THERE IS NO BUBBLE, BUT ARE WE CONCERNED CENTRAL BANK IS ADOPTING SUCH AN ATTITUDE? > > TO BE FAIR, THE CONSENSUS AT THE MOMENT IS THAT IT WOULD BE LOW FOR LONGER. THE WORLD OF CENTRAL BANKS IS PREDICTING ACCOMMODATIVE POLICY. THERE ARE LOW INTEREST RATES. THE DANGER IS LOWER. BUT THERE ARE TWO THINGS I'VE BEEN SPEAKING ABOUT LOUD AND CLEAR. ONE, THE BUILDUP OF DEBT IS REACHING THE POINT THAT IT COULD PRESENT A PRESENT DANGER. FOR EXAMPLE, 43% OF LOW INCOME COUNTRIES ARE ALREADY AT OR CLOSE TO THAT INTEREST. COMPANIES BORROWING AT HIGHER RATES SHOULD BE CONCERNED AND BE VERY CAREFUL. SECONDLY, WE NEED TO RECOGNIZE THAT LOW INTEREST RATES MEAN HIGH APPETITES FOR YIELDS. HIGH APPETITE FOR YIELD IS HIGH APPETITE FOR RISK. SO YES, WE NEED TO BE MORE FOCUSED ON THAT. > > FRANCINE: LOW INTEREST RATES MEAN THAT POTENTIALLY CENTRAL BANKS DON'T HAVE THE TOOLS TO DEAL WITH THE NEXT DOWNTURN. ARE THEY EXHAUSTED? > > SOME ARE AND SOME AREN'T. THE PEOPLE'S BANK OF CHINA HAS SPACE. A NUMBER OF COUNTRIES THAT ARE DOING BETTER IN TERMS OF GROWTH HAVE SPACE. BUT MANY ARE ALREADY AT NEGATIVE TERRITORY, OF COURSE. THIS IS WHY IT IS VERY IMPORTANT TO TURN AND LOOK AT OTHER INSTRUMENTS. WE HAVE TWO MESSAGES. ONE, WE OUGHT TO BE LOOKING MORE SERIOUSLY TODAY. FRANCINE: BUT WILL THEN? -- THEY? > > SOME ARE MAKING GOOD MOVES. SELF -- SOUTH KOREA HAS HAD SOME GOOD STIMULUS. JAPAN IS COMING UP WITH STIMULUS . GERMANY CAME UP WITH A PLAN TO INCREASE SPENDING. I AM VERY HOPEFUL THAT WITH THIS WHOLE CONVERSATION AROUND CLIMATE, WE WILL SEE AN AMBITION TO INVEST IN CLIMATE RESILIENCE. THERE IS NO SHORTAGE OF THINGS TO INVEST INTO, BUT THEY DO NOT TRANSLATE INTO VIABLE PROJECT. WE MAY HAVE TO SAY, NO TIME TO WASTE, CONCENTRATE ON GROWTH. HASLINDA: YOU TALK ABOUT COUNTRIES WITH THE CAPACITY TO MOVE, BUT COUNTRIES LIKE ITALY MUCH HOW MUCH CAN THEY MOVE -- ITALY, HOW MUCH CAN THEY MOVE? > > IT IS TRUE THAT COUNTRIES WITH MORE NARROW FISCAL SPACE SPACE MORE DIFFICULTIES. EVEN IN THESE COUNTRIES, THEY CAN DO A CAREFUL REVIEW OF POLICIES. THEY CAN DO A REDIRECTION OF PUBLIC SPENDING TO BE MORE CONDUCIVE TO STIMULATING GROWTH. WE ALL HAVE TO RECOGNIZE THE NEED TO BUILD BUFFERS. WE HAVE BEEN SAYING THIS FOR THE LAST TWO YEARS. BUILD BUFFERS, YOU WILL NEED IT. AND THINKING LONGER-TERM, IN A MORE UNCERTAIN WORLD, THERE IS GOING TO BE A MISSED STEP IN THE FUTURE. FRANCINE: BRIDGEWATER BELIEVES THAT BECAUSE OF THE CENTRAL-BANK ACTION THEY HAVE ENDED THE BOOM BUST CYCLE. HOW DIFFICULT IS IT TO UNDERSTAND WHERE WE ARE IN THE CYCLE AND COULD EVERYTHING BE OUT OF WHACK? > > IF WE ARE TALKING ABOUT SCENARIOS AND PROBABILITIES, THERE IS ALWAYS THE RISK THAT WE END UP WITH AN OVERLAY OF FACTORS THAT ARE CREATING A MUCH MORE SIGNIFICANT IF GOLDIE -- DIFFICULTY. I DON'T SEE THAT. WHAT I SEE NOW IS THAT THERE IS INCREASED AWARENESS AMONG POLICYMAKERS THAT THEY HAVE TO TAKE ACTION. YOU AND I TALKING ABOUT THAT, HOPEFULLY PEOPLE ARE LISTENING. FOCUS ON WHAT YOU CAN DO TODAY TO PROVIDE MORE STABILITY FOR THE ECONOMY AND BETTER CONDITIONS FOR GROWTH. WE ACTUALLY WORK DEFINING

No schedule data available.

IMF’s Georgieva Sees Debt Buildup Reaching a Danger Point

Kristalina Georgieva, managing director at the International Monetary Fund, discusses her top market concerns for 2020, the dangers of debt buildup, and the monetary policy space of global central banks. She speaks at the World Economic Forum’s annual meeting in Davos, Switzerland on "Bloomberg Daybreak: Europe." (Corrects guest's first name in description.) (Source: Bloomberg)

More From Bloomberg Markets
All episodes and clips

QuickTake
Explaining the world with Bloomberg News
More episodes and clips