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00:00Look these are fairly chunky downgrades and I'm wondering what about the reasons behind them what is going on here. Why the downgrades. The main reason for the downgrade for this year comes from significant downgrades for the U.S. and China. So we have the US being downgraded by one point two percentage points and China falls quite significantly. The reason for the US is that we no longer have the build back but a fiscal package in our baseline. And we are also expecting monetary tightening in the U.S. So that's in the baseline that's been baked into it their supply disruptions. So these factors are behind the downgrade for the US. In the case of China. We have the faster than expected slowdown in the real estate sector and also the weakness and recovery in private consumption thus leading to the downgrades. He talked a little bit about monetary policy here. You're seeing a very serious divergence between say the easing or say the tightening in the United States whereas the easing in other economies like China for example. How much is that divergence a risk to the global economy. Think it is a reflection of the fact that countries are facing different kinds of problems and they are also recovering at very different speeds. In the case of the U.S. you know the U.S. economy is back to pre pandemic trend. The unemployment rate is under 4 percent. So there is it's been a very strong recovery. Private demand has been very strong. And so all of that combined with inflation at 7 percent at the end of last year. Just one point in one direction which is that interest rates have to go up. In the case of China it is an economy. That's where the momentum was very high but it's slowed and they are still not back to pre pandemic trends. Private consumption remains weak. And also the amount of stimulus that they provided both on fiscal and monetary was somewhat smaller than the U.S.. So countries are at very different points of it. I think the important thing to keep in mind is that interest rates in the US at least are going up at a time when this recovery has been strong. Even if you look at whatever has been baked in into interest market interest rates that still does are still small numbers. Given the level of inflation. So it's still a fairly accommodative monetary stance. Geeta what is your view of the word transitory. Is it useful. Well I think it's become confusing for people because some people think transitory means literally a very quick up and down. But what we've seen is inflation has gone up quite a bit and it stayed. It has persisted for longer. So our projection is for inflation to come down through much of this year. For instance for the US but it stays elevated. So by the end of this year if you look at core inflation we still have that at three point four percent which is significantly higher than the Fed's target. And so that sense it's you know you're seeing are seeing a decline. We expect it to come down but we're going to have to wait in 2023 at least given current expectations for inflation to come back down. Much closer to the Fed target than a key place where inflation perhaps isn't transitory or isn't proving to be at least is a lot of those emerging markets. The one that comes to mind to me at least is Argentina. They do have a debt payment do about 700 million on Friday. Do you expect them to meet that payment. We're working very closely with the Argentine authorities. We're on the line. We would like to have a program that would help the people of Argentina. It has to be a program that can address the imbalances in the country because that's the only way to help the people of Argentina. At the same time we recognize that there are you know it's a very difficult situation socially economically. And so we're being pragmatic in our approach and being flexible. But we need a program that can help the people of Argentina. So we're just working very closely with them. Geeta why is the eurozone struggling to bounce back as we're seeing elsewhere. We are seeing relatively by comparison weak growth. And I'm wondering why that is. Is it the high debt levels in place like places like Italy. Is it the relatively small fiscal response. Is it concerns about what is happening with the energy story going forward and the inflation that is likely to derive from it. What is happening here. Why aren't we getting a more robust growth story out of Europe. I would say that for the euro area for instance as a whole that I would say that the recovery has been going quite well. It's not the same as the U.S. It's not back to pre pandemic trend. There are differences within the euro area. So for instance France is expected to be back to pre pandemic levels at the end of this year while the others most of the other big economies are more in 2022 to sorts. It's somewhat slower but that's also a reflection of the fact that you know several of these countries depend very heavily on tourism and that has not recovered with this ongoing pandemic. Germany depends. Very heavily on the auto sector. That's one of the reasons for the downgrade that we have for Germany. But again you know if I looked at the euro area and the medium term for instance I would you know they're basically back to pre pandemic trend. So overall I think there are countries the country specific factors why things are not going well. But I wouldn't say that the overall sentiment is one of you know disappointing recoveries. You know we got about 30 seconds here so I'll wrap it up with one key question which is of course on everyone's mind. That is the Russia Ukraine kind of conflict here. How much of that is going to affect the global economy. Well that is a major concern. We've had headline inflation go up everywhere because of high energy prices and this conflict can only send that higher. So that is a major risk. And you know whether that will then lead to second round effects on inflation and have implications for inflation expectations and so on. So I think that is a very very important risk of playing close attention to.

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Why the IMF Downgraded Its Global Growth Forecasts

IMF First Deputy Managing Director Gita Gopinath discusses the IMF's global economic growth projections for 2022. She speaks with Bloomberg's Guy Johnson and Kriti Gupta on "Bloomberg Markets." (Source: Bloomberg)

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