Alphabet CFO Ruth Porat and Gita Gopinath: Where Public Meets Private

I do think that given that we've seen multiple shocks hitting companies, that there is a need to diversify the sources of your inputs. Secondly, I think it's important for companies also to alter the technology they use, the how they produce, so that they have inputs that are much more substitutable.

So, international financial institutions like the IMF are working hard to help policymakers deal with all the disruption in the world these days. But what about the private sector? What is their role in all of this?

How should each of us think about what we can do given the funding gap in emerging markets? There is the way that public action can catalyze private investments.

Today we hear the chief financial officer of Google and Alphabet Ruth Porat ask IMF first deputy managing director Gita Gopinath how the private sector fits into the growing number of challenges and opportunities in the global economy. Here's Ruth Porat.

Thank you, Ruth. A real pleasure to join you.

So, firstly, in terms of the outlook, without a doubt global growth is slowing, and we downgraded our forecast for the global economy in April from 4.4% to 3.6%. The war has hit many economies sizably as prices have gone up for energy and food around the world, further fueling inflation. That has been a knock on growth. Central banks around the world, especially now in the major economies, are raising rates with a specific purpose of slowing down what they see as overheating in their economies. And we have China which has had much more stringent lockdowns than many anticipated, and the recent numbers that have come out of China certainly point towards even weaker growth than we might have expected in April. So without a doubt there are headwinds to growth, and growth is slowing. The disconnect, if I may use that word, that I thought well found in Davos was the kind of the jumping to the conclusion that we are staring right now at a global recession and it seems imminent, and that's the part where I would take a little pause, because for this year, you know, with the global economy right now we have 3.6% growth. We could head for a downgrade. That is a possibility. But still, that is a pretty healthy growth number relative to what we know in terms of decadal averages. Now there is a question of what comes next year, which is 2023 when all of this tightening in monetary policy and so on starts having effect. The fiscal stimulus that was a big part of the revival gets withdrawn even more. And I think 2023 is the risk is a year when growth continues to slow. And then the risks, I would say, if there were worse news on other fronts in terms of sanctions and counter sanctions, or in China, or inflation, then you could risk ending up with a recessionary environment, but as of now I would not make that prognosis.

So, the 1944 Bretton Woods, as you know it was in New Hampshire that the IMF was born, where the articles agreement was signed, and the goal was to help the world prosper with peace. And right now, I would think of at this current juncture, we are at a time where we had Russia's invasion of Ukraine, clearly not in the direction of peace, and that is now generating further tensions that were building up even before the pandemic and the war. So we were concerned about geopolitical tensions when it comes to trade. It was there in 2019 and 2018 with the US-China tariff wars. You have the decoupling that we were concerned about in terms of technology. So this current environment we're in is one where we do worry about further fragmentation in the global economy. So if you ask me right now, if I look at globalization, would I say that we are now in the phase of deglobalization? Actually, I would say no, that's not the case. I genuinely believe that global trade as a share of GDP has slowed, that was to be expected. We have had headwinds to globalization. But at the same time, global trade was very resilient during the pandemic years. I am more concerned about what may be coming, the risks that are out there, especially in the current geopolitical environment, the tremendous uncertainty around policies with discussions of nearshoring and regionalization and so on, and what that could actually translate to, and that is costly because when we did the study in 2019 about what was the cost to the global economy of the increase in trade uncertainty that came with the US-China trade disagreements, that shaved off about a percent from global GDP, and now we're talking about a potentially much greater scale of trade uncertainty. So that's the kind of juncture we're in. In terms of the principles of the new Bretton Woods moment, I would say first and foremost it's important for the global community and for global leaders to do no harm, given that we are in an environment where global growth is slowing, where inflation is very high, so the policy mistakes can be very costly. We know that global integration has been very helpful keeping productivity high and therefore keeping price pressures lower. We cannot mess that up. The second piece, principle I would say, is that in addition to just prosperity, I think there's a clear recognition that we need greater sustainability and we need greater resilience. If you look at measures of income inequality, wealth inequality over the last couple of decades, they have gotten worse. There have been attempts to address it but much more action is needed on that front. Similarly, we need to agree that we have to grow. It has to be done in a sustainable fashion. We need to address the catastrophic risks of climate change. We need greater resilience. Without a doubt the war and the pandemic have shown that it's important to be able to secure your supply chains, to diversify. So all of this needs to be done. So this is the new Bretton Woods moment in the sense of prosperity, but that comes with shared prosperity, resilience, and sustainability, and that's what we are working towards with our other institutions.