16 Jul 2012

IMF / ECONOMIC OUTLOOK PRESSER

Posted at: July 16, 2012 5:31 pm

Duration: 02:04

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STORY: IMF /ECONOMIC OUTLOOK PRESSER
TRT: 2.04
SOURCE:  IMF
DATELINE: 16 July, 2012

SHOTLIST:
1.	Wide shot press conference
2.	SOUNDBITE: (English) Olivier Blanchard, Economic Counsellor, IMF:
"The main risk is obvious.  It is that the vicious cycles in Spain and Italy become stronger, that output falls even more than it does, that one of those countries loses financial access to markets.  And the implications of such an event could easily derail the world recovery."
3.	Cutaway journalists 
4.	SOUNDBITE: (English) Jose Vinals, Financial Counsellor, IMF:
"The measures agreed in the most recent European leaders' summit provide significant steps to address the immediate crisis, but more is needed, not only the timely  implementation of the measures that have been agreed, but also further progress on banking and fiscal unions.  And this must be a priority."
5.	Cutaway journalists
6.	SOUNDBITE: (English) Carlo Cottarelli, Director, Fiscal Affairs, IMF:
"The recent decision to slow down the pace of fiscal adjustment in Spain, still at a relatively important pace in terms of fiscal adjustment, but it has been slowed down with respect to the previous targets, is a good decision in light of the weakness of the Spanish economy.  So in general, we are happy about the pace of fiscal consolidation in Europe."
7.	Cutaway journalists
8.	SOUNDBITE: (English) Jose Vinals, Financial Counsellor, IMF:
"And this is why it's very important that the efforts which are currently underway regarding the regulation of financial institutions be completed, that these regulations are implemented without delay, and that there is also, together with regulation, good supervision in order to make sure that financial institutions have internal procedures and governance that avoids these things from happening in the future."
9.	Wide shot press conference

STORYLINE:

An already sluggish global recovery shows signs of further weakness, mainly because of continuing financial problems in Europe and slower-than-expected growth in emerging economies, the IMF said in a regular update to its World Economic Outlook.
Two other IMF reports were also released July 16. The update to the Global Financial Stability Report said that risks to financial stability increased in the second quarter of 2012 because of the continued slow global recovery and fears about the quality of bank assets in Europe. An update to the IMF's Fiscal Monitor said that fiscal adjustment in both advanced and emerging economies is proceeding as expected. 
The latest World Economic Outlook projects that the global economy will grow 3.5 percent this year, down 0.1 percentage points from the April forecast, and 3.9 percent in 2013, 0.2 percentage points lower.
"The main risk is obvious.  It is that the vicious cycles in Spain and Italy become stronger, that output falls even more than it does, that one of those countries loses financial access to markets.  And the implications of such an event could easily derail the world recovery," said Olivier Blanchard, Economic Counsellor to the IMF.

In the Global Financial Stability Update, the IMF said that risks to financial stability have risen over the last quarter, as the global recovery still struggles and fears about the quality of bank assets in Europe continue to roil financial markets. However, the summit agreement to create a Europe-wide banking union that will help break the negative links between governments and banks has been a positive step.

"The measures agreed in the most recent European leaders' summit provide significant steps to address the immediate crisis, but more is needed, not only the timely  implementation of the measures that have been agreed, but also further progress on banking and fiscal unions.  And this must be a priority," said Jose Vinals, Financial Counsellor to the IMF.

Meanwhile the IMF's Fiscal Monitor update said that fiscal adjustment is proceeding generally as expected in advanced and emerging economies. Advanced economy budget deficits are forecast to decline by about 0.75 percent of GDP this year and about 1 percent of GDP in 2012, a rate that strikes a compromise between restoring fiscal sustainability and supporting growth. Spain, in particular, has announced some positive changes in its efforts to cut Spanish deficit levels.

"The recent decision to slow down the pace of fiscal adjustment in Spain, still at a relatively important pace in terms of fiscal adjustment, but it has been slowed down with respect to the previous targets, is a good decision in light of the weakness of the Spanish economy.  So in general, we are happy about the pace of fiscal consolidation in Europe," Carlo Cottarelli, Director of the IMF's Fiscal Affairs Department said.

When asked about allegations of manipulation of the London interbank offered rate, or Libor, which sets the cost of borrowing for millions of businesses and investors, Vinals said that the case highlights the need for the need for proposed regulation.

"And this is why it's very important that the efforts which are currently underway regarding the regulation of financial institutions be completed, that these regulations are implemented without delay, and that there is also, together with regulation, good supervision in order to make sure that financial institutions have internal procedures and governance that avoids these things from happening in the future," Vinals said.

Filed under IMF.