The following is the transcript of an interview with Kristalina Georgieva, Director of the International Monetary Fund, broadcast on April 14, 2024.
MARGARET BRENNAN: We’re back with International Monetary Fund Managing Director Kristalina Georgieva. I understood correctly this time, I apologize. Oil markets. have been disrupted due to this instability in the Middle East, the risk of escalation and the threat to global shipping as well. Can you assess at this stage what the economic impact will be?
KRISTALINA GEORGIEVA, EXECUTIVE DIRECTOR OF THE INTERNATIONAL MONETARY FUND: So far it has been somewhat subdued. We saw on Friday, when news of a possible Iranian strike against Israel broke, oil prices jumped 1%. We have seen the impact of this conflict so far, primarily in the epicenter affecting Israel, and in particular, devastating Gaza and the West Bank with spillover effects into neighboring countries. Even the destruction of ships in the Red Sea has not yet had a major impact. But an impact, however minimal, is not desirable in an economy marked by high uncertainty and where inflation is still not brought back to target. Very simple. Oil prices are rising, inflation is rising. So what can be done to reduce uncertainty is, of course, for others – for politicians, for the military, from an economic point of view, the more we reduce uncertainty, the better.
MARGARET BRENNAN: We have a lot of uncertainties right now, one of them surrounding the U.S. Congress and the financing of these conflicts. Congress is considering allowing the Biden administration to seize Russian state assets, potentially for use in negotiations or to rebuild Ukraine. What do you think of this idea?
DIRECTOR GENERAL GEORGIEVA: It’s really up to the jurisdictions that have the power to make a decision to take…
MARGARET BRENNAN: But it could have a global impact.
EXECUTIVE DIRECTOR GEORGIEVA: What we do is we look at it and then we assess what the impact might be.
MARGARET BRENNAN: That’s right.
DIRECTOR GEORGIEVA: And then, of course, it’s about how this would be received as news across the world, the countries that hold their reserves and let’s remember that today there are 11 trillion of dollars of reserves in countries around the world. , they would look at this with some attention. So what is our position: when a decision is made, whatever it may be, think about the consequences and in particular the law of unintended consequences and take them into account.
MARGARET BRENNAN: What you’re saying there is that this could essentially cause what, a flight of assets out of the banking systems in Europe in particular?
GENERAL DIRECTOR GEORGIEVA: We have not seen a reaction of this magnitude. Our point is very simple. We have an integrated global economy, even with the winds of fragmentation…
MARGARET BRENNAN: That’s right.
DIRECTOR GENERAL GEORGIEVA: –always, countries are linked to each other. So whatever decision you make, make it taking into account the desired impact…
MARGARET BRENNAN: Yeah.
GENERAL DIRECTOR GEORGIEVA: …and also what could be an unintended consequence.
MARGARET BRENNAN: We are in an election year. As you know, Goldman Sachs released a report describing potential tariff increases as the most important issue for the economic outlook if President Trump is re-elected. It continues to offer rates ranging from 10% to 60%, or even more. How would you assess the impact and risk of such an approach?
DIRECTOR-GENERAL GEORGIEVA: Let me first reflect on why we have seen, over the last decade, a backlash against globalization. We all know that an integrated global economy improves growth prospects and leads to improved living standards, but not for everyone. What we’ve seen is that communities that have been negatively affected by globalization and haven’t been taken care of, haven’t been helped to cope with it, are the backbone of this negative reaction we are witnessing today. So my most important point is that trade is a good thing. But it’s not necessarily good for everyone. And politicians need to think about it. We must ensure that the benefits are more widely shared across society.
MARGARET BRENNAN: Tariffs would also add to inflation. Do you agree, as an economist?
GENERAL DIRECTOR GEORGIEVA: Of course. There is… let me be very clear. The reason we support an integrated global economy is that it reduces costs and improves the well-being of people around the world. We therefore believe that we should strive to have a more integrated economy. And let me say this: What we’re seeing is that business structures are already changing.
MARGARET BRENNAN: That’s right.
GENERAL DIRECTOR GEORGIEVA: What is the impact? The impact is that the so-called connector countries play a more important role. So you don’t see trade going from A to B, you see trade going from A to B to C to D. So we’re lengthening supply chains. And that, of course, leads to high costs for consumers and, as you said, it’s not good for inflation.
MARGARET BRENNAN: Well, you have a lot of work ahead of you in this second term. You have just been re-elected, congratulations.
GENERAL DIRECTOR GEORGIEVA: Thank you. Thank you, Marguerite.
MARGARET BRENNAN: Thank you for joining us. We will be back very soon.
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