To introduce our panel, first I'll start with Luis Caputo, the Minister of Economy for Argentina.
Olá Cardoso, the Governor of the Central Bank of Nigeria.
Kristalina Georgieva, Managing Director of the IMF.
This is a blank chair. Nobody is here, but there will be somebody here. It is the Deputy Prime Minister of Thailand and the Finance Minister who will make an entrance, Ekniti Nitithanprapas. He will be here, and of course, also not last but not least, Kyriakos Pierrakakis, the Eurogroup President and Minister of the Economy and Finance for Greece. Thank you so much for being here.
Managing Director, I want to start with you. We talk about growth in the economy as surpassing expectations, and people say it's resilient. Is resilient the right word?
Well, we have—I'll let you choose. October 25, we projected growth for 2026: 3.1%. April 26, we projected growth for 2026: 3.1%. On Tuesday, we issued our projections for 2026. What is the projection? 3.1%. So yes, growth has been resilient, but this resilience is on a fragile foundation today. And let me explain why we should not take it for granted.
First, because behind this average number, there is very significant divergence, and the composition of this 3.1 really changed quite a lot since October last year. Today there is a group of economies that are lifted up by the enthusiasm about artificial intelligence and investment. So these economies we have upgraded—it's a small group, the AI producers: China, the United States, of course, India, but also the AI suppliers, those that are integrated in the AI value chain. And Thailand is one of these countries, Korea is one of these countries. There are seven altogether today. But on the other side, we have downgraded a number of countries, first and foremost those that are affected by war and those that are importers of fuels and have nothing to do with the AI revolution. So this is number one: we are seeing very rapid increase in divergence across the world.
Number two: energy prices up, food prices, and now El Niño would do that to us—up. Artificial intelligence creates more demand, and we know when we have a demand shock, what happens to prices? Up. So when inflation is stubborn, when inflation is up, that means central banks need to tighten. On the other side, we have very high levels of debt, including in some advanced economies—high debt, high deficit. When we have interest rates up, cost of this debt service also grows.
And the last point I would make about our beloved global economy today is: when we look at the drivers that keep us up and moving, the most important one is artificial intelligence. It makes it, however, all of us dependent on this enthusiasm being sustained. So we have a world economy that is like on one leg. The rest of the economy not so strong. What happens if this leg wobbles? And there are two reasons why that may happen. The first one is Amara's Law. It says we overestimate the technological benefits in the beginning, in the short run. We underestimate them in the long run. But when we overestimate, that means we are enthusiastic, but then we are disappointed, then we pull out, and then there is a big problem.
Sorry for coming late. The Development Committee has been quite late. I'm so sorry for coming late.
The obligation of the house—he has to be everywhere all the time, everywhere.
And the second reason—so this is one: we may have disappointment, we pull out, and that creates stress. And the second reason is: what if AI decides to run away from human control and does things that are very, very risky for financial stability? So to conclude: yes, the world economy has been resilient to multiple shocks, but this resilience is being now depleted. And if we are smart, what are we going to do? Rebuild, rebuild buffers, reduce debt, get our house in very good order.
So, talking about high energy costs and war affecting a region, let's head over to Europe. I'm sorry, but this has been actually a theme of the meeting so far—has been a question about Europe's resilience and a question about the problems right now in France and just generally with the region. Minister Pierrakakis, would you say that the pessimism that you're hearing is unwarranted? Do you think that there is something that is maybe being underappreciated about the resilience of the Euro region?
Well, I would say first we're mindful, but we're not alarmed. And we're not alarmed in the sense that we know that the fundamentals are there and they are strong. If there's one key word about Europe, the key word is resilience. And I think we've proven that in a series of crises. Obviously, of course, we're operating in a high-yield environment right now. If you make a comparison, you know, between 2026 and 2016, the average price of a 10-year bond, the yield was 1.1% in 2016. Now it's 4%. It's 5.4% for the UK, 5.2% for the US, 4.9 for France, notably 4.4 for Greece. And we all know that the markets are looking at the fiscal trajectories of countries, the fiscal trajectories of states. So obviously in a high-yield environment this plays a much larger role.
But if I may use my national experience here, I think that Greece manifests that, you know, getting your fiscal house in order, as Kristalina just said, is the necessary condition to be able to achieve growth. And we've managed to do that. I come from a country which used to be supported from this institution, and now we're a country that offers support to its citizens and to businesses at the point where we're having significant challenges in the winter right now, given the energy crisis that you just mentioned.
And we'll get into some of those lessons and what you learned in a minute, but I do want to go there as it is relevant. Minister, thank you so much for your hospitality and for hosting this. I want to ask about your experience of resilience as a major export nation that also imports a lot of energy during this shock. You know, it has been rapid growth. How have you maintained that given some of these pressures?
It's like—I think Thailand is like a small boat facing many storms, similar to other countries. So I think there are like four storms facing us: rising energy price, and we are oil import dependent. So we imported a lot. So we have been affected quite a lot because rising price, rising cost of living—that's the first storm. The second storm is geoeconomic fragmentation. So because people diversify their supply chains, there are some opportunities because a number of investments are coming to Thailand, but also those who are not part of the supply chains will be affected. The third one is, as the Minister mentioned, rising yield, interest rate.
Luckily, Thailand has stuck to fiscal discipline. So our government bond yield is quite low compared to the US, to Europe. Our government 10-year yield is around 2.3%. So much lower than the US and Europe, thanks to the fiscal discipline. The last one is the rising AI. So those who are part of AI will be better off, but those who are not in the supply chains will be worse off. Thailand is lucky to be part of the AI supply chain.
So that's why we benefit quite a lot out of the supply chains of AI. However, being a small boat, what we need to do is to make sure our boat is strong enough to withstand the winds. That's why we stick to fiscal discipline, macroeconomic stability. That's why our interest rate and our bond yields have not risen so rapidly like other countries, thanks to the macroeconomic stability. But macroeconomic stability is necessary, as you said, but it's not the destination. We have to do a lot of things—structural reforms.
And also the most important thing is to turn the shocks into opportunities. Doing what? Helping people, businesses adapt to change very fast. So we need to accelerate transitions for businesses and people. So otherwise there will be adverse shocks. Those who are affected the most will be those who are low income. So we need to change that. So we need to support them to make transitions. My final word is that building resilience is to support them to absorb the shocks and also to accelerate the transitions to help them deal with bigger storms coming.
And we're going to get into some of these efforts to try to sort of upscale some of the workforce and what that entails. Governor Cardoso, I noticed that both of you are talking about holding rates lower. You just cut interest rates, I believe, by the most going back to 2007 in Nigeria, even though you're seeing the US and Europe raise interest rates, even though the inflation rate is still 15% and there still is this inflationary pressure. What gave you the confidence to do that given this backdrop?
Okay, thanks very much, and I think it's an excellent question. Firstly, for context, we are at a different stage of the inflation cycle. In 2023, after consistent currency crises and a collapse in investor confidence, a new administration had no option but to take away costly subsidies and integrate multiple foreign exchange rates, multiple foreign exchange windows. Okay, these are things that should have been done a long time ago, but they were not done. So that was done and brought about, as you can imagine, its own huge inflationary pressures.
Now, 2024, we started hiking, and in 2024 the rest of the world was easing, but we had no choice. Okay, we did a 400 basis point hike in one go, okay, and within that year we did about 800. Okay, so it was a very aggressive posture, very, very aggressive. But guess what? Doing that and doing other essential reforms, such as ensuring more transparency, fixing the foreign exchange market, brought about results. And inflation, which had gone up to 30-odd percent—it was about 34%—gradually began to ease and came down to about now around 15%.
And our reserves also went up quantumly. We got to a stage where we are now, where our reserves are at an all-time high, the highest in 18 years. So investor confidence reacted to the things we had done, and that gave us the confidence to do a lot of things we did. Painful though they were, it brought back credibility because we were consistent in saying certain things and doing them. It ensured that certain things we'd seen—for example, the question you just asked, the differences—our transmission mechanism with respect to our monetary policy rate was not transmitting the way we wanted it to. There was a gap, and so we felt it was time to close that gap and reset that, and that's why we did it.
Now, the reaction to it, as many would have expected, is, you know, turmoil, people, you know, losing confidence. But it didn't. And it didn't because investor confidence had come back and our communication strategy was very clear. And people had the confidence that we were doing the right thing. The markets knew that there was a disconnect, and we closed that gap. So they didn't necessarily panic, but people had the confidence that the central bank had the credibility to do what they did.
Mr. Caputo, you're at a situation right now where Argentina has actually held up in a way, faced with some of these shocks, but still is quite reliant on financing from the World Bank and from the IMF in addition to the bond markets. How do you move to a place where you're self-sufficient, where you don't necessarily have to turn to these levels, and you're able to withstand these multiple shocks—a small boat in a big ocean with multiple storms, as the Minister was talking about?
Well, thank you, Lisa, for the question. And in our case, I would say that we had no other choice but, as Kristalina likes to say, putting our house in order. I like to see this resilience effect all around the world, but I must say that I wouldn't rely much on this resilience coming from emerging markets. Allow me to be a bit skeptical about this, and for two reasons. One, because it looks like these shocks are going to take longer than any one of us would have anticipated or hoped. So if that is the case, resilience by definition will have to last longer, and you don't want to rely that much on that because resilience is there until it is not anymore.
And we do not need the whole world to collapse all together. Just one country, one important country getting into trouble, could probably generate a systemic risk and affect all of us. So I'm not trying to lecture anybody here. I'm just being selfish. I don't want other countries to affect any of us who are actually doing a very hard job. So we've been actually doing that from the very beginning, since President Milei took office. We eliminated our fiscal deficit, that was five points of GDP, in the first month of our mandate, and we didn't do that by raising taxes. We actually reduced government expenditures by 30%.
And in a way, we defied a myth or a longstanding theory that fiscal consolidation was politically unpopular. Our president actually holds a level of popularity significantly higher than any of his predecessors that were running significant fiscal deficits. And two, we also defied the theory that this could be recessionary. We will be growing for the third consecutive year. And we were also able to lower inflation from the 211 back in 2023 to 30%. Now, still high, but in a very good disinflation process. We were able to generate more than 500 jobs. We reduced poverty from 57% to 32%. So we lifted out of poverty almost a quarter of our population.
Exports are ballooning. We are in record export. So we have fiscal surplus, we have commercial surplus, we have a current account surplus. And the way we will continue in the following years is by fulfilling our goal of reducing the weight of the state in the economy. And how are we going to do that? By eliminating further taxes. We have already eliminated three points—the equivalent of three points of GDP. So we'll continue doing that. We'll continue eliminating regulations until we become, as our president wants, the freest country in the world.
We'll get into what eliminating taxes and trying to draw foreign business will do in a minute, and how to explore some of the natural resources. Managing Director, it seems like there is a real theme lurking under this, and that is the debt loads of developed nations in the world's biggest economies right now that have been growing substantially. You flagged the US and China in particular in your latest report. Do you ever feel like you're banging your head against the wall? I know we've talked about this before because you keep saying, 'Cut it out. Get your house in order,' and it's not happening, and in fact it's getting worse. So what has to happen?
Well, let me make two points. One, it is happening in places where the lesson is learned that you cannot spend endlessly money you don't have. We have on this panel great examples. Greece—
We have Argentina. And I can go through my list of countries that have learned this lesson, unfortunately, most of the time, the hard way. My predecessor Christine Lagarde used to say, 'Fix your roof when the sun is shining.' But human nature being what it is, we fix the roof when it is pouring. And nonetheless, we have excellent examples of countries that have brought back fiscal discipline. They have taken the reforms, structural reforms that promote growth.
And the question is, are we going to find the path to also reduce and eliminate excessive imbalances? So, let me explain to the audience that may not be so familiar what this is. We want countries to have balance. They export, they import. That is, that we don't have situations in which one country only exports and another country only imports and sucking in capital. That is a disbalance. When it goes out of whack, we call it excessive. And the problem we face is that over the last years, these excessive imbalances have been growing, with the biggest source of imbalance coming from the two largest economies, China and the United States.
China not having enough domestic consumption, exporting a lot, and the US the opposite—not saving enough, having a high level of debt and deficit. And then we have some of the European countries where the problem is somewhat different. It is not investing enough, not lifting up productivity enough. So the rest of the world is affected. And you would say, why are other countries affected? They are affected because, one, if you want to develop your economy, you want to produce and compete. And there is some large country that sends goods, has an advantage of long-time building manufacturing capability. For many developing economies, that turns into a problem. Even for developed economies, it becomes a problem.
And then on the other side, if you have one economy being very attractive for capital, sucking in capital for good use, for productive use, but then for the rest of the world, there is not enough. And this is why we are working on that. And I want to say in a positive way, I'm impressed how seriously this topic now is a subject of discussion and how the countries that need to take action are embracing it, because for their own good, when you have an imbalance, an excessive imbalance for a long time, sooner or later it affects you negatively. And that is—I'm not going to go—I think I was professorial enough. I explained to the audience what is excessive imbalance. And I would finish by saying that I'm more optimistic today than I was a year ago that this problem is a solvable problem. And I'm grateful to you for asking me this question so we can build in more understanding and support so these imbalances can be resolved.
To sort of exemplify it, Minister Pierrakakis, there are a couple of things here. First, I do want to give you some space to talk about Greece's experience and what that could lay for France. But specifically to the Managing Director's point, how does Europe grapple with the imbalance? I mean, right now there's discussion between European officials and Chinese officials about imports of hybrid vehicles and a question of how to manage this relationship that's become a bit more fraught. I mean, what is the right balance? How do you create innovation while also being self-sufficient, while also reducing debts, while also having the same kind of, you know, regulatory structure?
We're trying to do many things at once, that's for sure. And at the Eurogroup, we expanded the scope of what we're studying as ministers of finance. You know, typically the traditional discussion of the Eurogroup was a fiscal discussion, especially 10 or 15 years ago. This is certainly the foundation. It's exactly what Kristalina said. Collective trauma can be a very strong lesson. And right now, if you look at the statistics in Europe, you have five countries running a headline surplus. Four of them were the program countries of the previous decade: Greece, Cyprus, Ireland, Portugal, and Denmark. So this was a lesson of collective trauma. Ideally, when you are to put your fiscal house in order, it shouldn't be because of experience. It should be because of inspiration. And because you mentioned what can Greece—what people can learn from Greece—I hate lessons in politics. I believe in inspiration.
So we need to be inspired, and that's the whole idea. Now, the environment under which we operate is more challenging. Simply look at the bond markets, as I mentioned before. You have geopolitical fragmentation. You have elevated energy costs. You have fiscal pressures in Europe. Average deficit 10 years ago was 1.7%. Now it's 3.5%. You have higher spending needs for social spending. You have higher spending needs for investment, for all the investments that we need to make. And you have AI that you mentioned before. AI being not only a technological force, it's also a macroeconomic force. Sovereigns are competing with technology companies right now for capital. So in this environment, we need to deliver the results. So obviously there is a strong challenge there.
The inspiration that I think Greece can offer in this regard—by the way, Kristalina, I saw your projection for Greece for this year for growth. I think we have developed a very healthy relationship with the IMF over the years.
Actually, Greece rushed and prepaid their obligations to the Fund. So clean.
That's part of the relationship. And then Greece said, you know what, we have learned so much, we want to share with others. So Greece is funding capacity development and technical assistance for other countries. I would say bravo.
So thank you for that. And vis-à-vis the projections, I mean, typically the IMF provides the caution, and we try to provide the upside surprise. So we plan to do that next year as well. But having said this, the lesson here, I think the inspiration here is: get your fiscal house in order. Markets are looking at your fiscal trajectory, and especially in a high-yield environment, they're looking at it much more acutely. But you need to do this, and you need to deliver the reforms at once, simultaneously. And this has a national flavor, a national element. There are idiosyncratic reforms that every member state in Europe or every country in the world needs to deliver.
And there are pan-European reforms that we need to deliver. Fragmentation in Europe is a strategic tax. The IMF has made a calculation that the barriers that exist in services or in manufacturing are equivalent to having a tariff. 110% is your calculation for services.
44% for manufacturing. So those barriers need to be removed. So this is part of the whole debate and the whole discussion, as you suggested.
How many people have asked you whether France was going to collapse?
Well, I hear stories. I mean, especially as someone coming from Greece, where the bond markets were vividly felt by us 15 years ago, we carry a national experience there. But as I mentioned at the beginning, we're mindful, but we're not alarmed, because we're at a different environment. Yes, all the challenges are there. But at the same time, if you look at Europe from a helicopter view, banks are much better capitalized compared to before. We have a different institutional framework compared to what we used to have in 2010. And obviously, we have a fiscal framework which states—
are implementing, or even when they're deviating, they're returning back to equilibrium. So in this environment, I trust that the fiscal trajectory that the French government is proposing will be implemented. Thus, all of us are part of the same debate and of the same equation. We're seeing differentiation in bond yields. We're not seeing fragmentation in Europe.
Minister Nitithanprapas, talking about the small boat in a big sea with lots of storms. One thing that the managing director was talking about was some of the changing trade partners and the sort of changing geopolitical order, and I wonder how you manage that as an export-heavy nation facing off with competing geopolitical interests, as well as AI, as well as the higher costs, etc. How do you maneuver with that?
I think we need to stay open, and also we need to work together with partners. For example, for Thailand, we work closely with ASEAN because we have integrated for trade and investment, but we should do much more. For example, we are trading among ASEAN around 22%, comparing to EU around 60%. So we could do much more to trade together.
I mean to reduce any vulnerabilities for external shocks outside the regions, and ASEAN is a growing region. 700 million people in ASEAN are growing, so we need to work closer.
And also we can work together and change our diversities in ASEAN to absorb some shocks and deal with any shocks. Let me give you some examples. All ASEAN countries are facing rising oil prices, so we need to work together. That's why we created the so-called ASEAN power grid, because we have Lao PDR having hydropower, which is green and clean energy. However, Thailand, Malaysia, Singapore, we also need energy. So we link the power grids together and use hydropower in Lao PDR, linked through Thailand, Malaysia, and Singapore. In that case, we can absorb energy shocks together. That's the first thing.
The second thing is that for rising AI, we have growing populations. A lot of our demand uses AI. However, we import a lot of AI from outside regions. So we need to create an environment to work together on the digital economy. That's why we created the so-called Digital Economy Framework Agreement. So we work together and then link them together. National digital ID from Thailand can link to national ID in Malaysia, in Singapore, in Indonesia. So we can link them together. So in that case, we can build infrastructures and develop AI, for example, and to use our customer base to grow together. That's also another story for financial markets. We have to work closer, and also digital payment. Now we link QR payment between Thailand and Singapore and Malaysia. In that case, people from Singapore can go shopping in Thailand easier. So that's how we support growth together.
So in that regard, I would not just focus on ASEAN. Thailand would like to open our market to other countries. In Europe, we are negotiating with the EU. So those who are not believing in international rules and orders, but we believe in international rules and orders. So we can hand in Thai hand work together and make our region stronger.
I have to say, Minister Nitithanprapas, you have done a real job in terms of giving incentives to foreign business to come here, because on the plane here there were tons of businessmen setting up different factories in Thailand. And Minister Caputo, that really brings us to what you were talking about, cutting taxes and trying to get incentives for companies to really come to Argentina. Do you expect that to lead to a certain fiscal sustainability where you no longer will rely on IMF and World Bank financing?
