Alexander De Croo (UNDP) on the meetings of the International Monetary Fund (IMF) & the World Bank Group - Press Conference

All right, good afternoon. Before I brief, I want to turn to our guest who is staying up late from Bangkok to brief you. And I want to welcome the Administrator of the UN Development Program, Alexander de Kruijff, who is in Bangkok for the IMF World Bank meeting. So, Administrator, please, over to you, and then we'll take some questions. Thank you.

Yes, thank you. Good afternoon, good evening to all of you. Indeed, as you said, this week, the governing bodies of the World Bank and the IMF are holding their meetings in Bangkok. There will be on Thursday a development committee, and there will be an IMFC meeting later this week. A few elements. Maybe first of all, on the global economic outlook. The global economy is more resilient than expected. But, and to quote managing director, Kristalina Georgieva, and she quoted Game of Thrones, winter is coming. And winter is coming, but I would say winter is coming in a different way. depending on which situation you are. For some countries, winter is coming, but the home is well insulated and there is enough money on the bank. For other countries, winter is coming, there is no roof on the house, and the bank account is completely empty. A lot of developing countries have a very difficult time, and they really are being squeezed between two different elements. First of all, almost all of them are experiencing what you would call a triple shock. First of all, very high energy costs and high energy bills. Secondly, an El Nino that is one of the most pronounced since 1950. And third, very high borrowing costs. And UNDP has published on Sunday a report, "No Time to Recover." You can find that on our website, and you can find all the data in the report that we just published this Sunday. But maybe mentioning a few elements. One, for example, is that today, if you look at developing countries, Today, developing countries, the median developing country is spending 9.5 percent of their total government income only on interest payments. That is three times higher than what developing countries are spending. On top of that, those countries have, in a quite successful way, been able to shield populations from the impact of the price hikes in fuel, but also in other elements such as food. In doing so, they have been able to shield 112 million people from falling back into poverty. But at which cost, at a very high fiscal cost, and that situation today is unsustainable, and you see more and more countries that are actually forced to pivot and to let the prices go high again. That is one element. The second element, and this is data that just came out, is that for the first time since 2010, the multidimensional poverty index has gone up. The number of countries-- the number of people in multidimensional poverty have gone up, as I said, first time since 2010. That multidimensional poverty looks at income poverty, but also access to utilities such as electricity and water. access to health care and to education. Those numbers should absolutely be a wake-up call to all of us. And our response as UNDP, we are a development organization, is to see how we can assist countries in growing more economic resilience. UNDP is an organization that delivers solutions, and in the long run, Countries are better off when they have strengthened their economy, when they are better at attracting investment, and when they create more and better jobs. And that is why here at this World Bank and IMF meeting, we have launched two worldwide initiatives, one focusing on fueling investments, and a second one on creating jobs. So the first one is called our Investment Accelerator. The Investment Accelerator works together with governments to improve the legal framework to attract more investment, rule of law reforms, financial infrastructure. Second element is building together with governments pipelines of investable projects. And third element is structuring those projects and making sure that they are implemented. That is the first response that we launched. The second response that we launched is the Job for Prosperity Facility. And there, really, the challenge is an enormous one. If you look at the next 15 years, there will be 1.2 billion young people graduating from school, going into the labor market the next 15 years. These are young people to whom we said, you know, if you study hard and go to school, you will have a job. Well, unfortunately, For only 400 million of these, there will be jobs. For 800 million of these, there will not be jobs. So there is a gap of 800 million jobs to be created in the next 15 years. is not going to go by itself. This is the result of policy, policy that we want to develop together with countries, analyzing which are the industries which have the most potential for job creation, looking how financing and especially domestic financing can be arranged, and doing policy reforms to make sure that you have a thriving labor market. Now, to do that, UNDP cannot do this on its own, and that is why we emphasize partnerships so much. We have, over the last weeks, signed a framework agreement with the World Bank and a list of pilot countries where we will be working together with them. And we have also an MOU that was signed with European Investment Bank and the European Bank for Reconstruction and Development, where an MOU has been signed as well. So maybe to conclude this briefing, I think we have seen that the global economy has shown remarkable resilience. But what we see is that resilience is not shared equally. Some countries have still quite strong economic fundamentals. Others do not have the fundamentals to withstand further shocks. And so at UNDP, We do not just want to do the analysis, you will see the analysis in our report, but at the same time, we also want to come with solutions and that is why we have launched two projects, two products, one investment accelerator to see how we can make countries investable, how we can attract various sources of financing to countries, the second one, Jobs for Prosperity facility, because we know that job creation is actually the only real sustainable way for people to grow out of poverty. That means stronger economies, more investments, more and better jobs. And this is really the program with which we of the NDP are here present in Bangkok and participating in the fall meeting of the World Bank and of the IMF. Thank you.

Alexander, thank you.

Maybe there might be a few questions.

Yes, let's hope so. Alexander, thank you. We'll go to Edith Lederer.

Thank you very much, Mr. de Ceuw, on behalf of the United Nations Correspondents Association for doing this briefing. As Steph said, my name is Edith Lederer from the Associated Press. I have Two questions. First, can you tell us what the impact of the major wars in the Middle East and Ukraine are having on the projection and basically the winter coming? And secondly, on the I must say I was astounded about the figure of 1.3 billion young people needing jobs in the next 15 years and only 400 million. Can you tell us whether the impact of artificial intelligence played into those figures and how the IMF and the World Bank are trying to address particularly the issue of jobs. Thank you.

Thank you, Ines. Thank you. Great question. Let me maybe start with the last element. So the projection is that 1.2 billion young people will graduate into the labor market in the next 15 years. The projections of job creation are based on the current state of technology. And we know that today we already live in many places in a highly technological labor labor market. Now, what is important is that the economy is not a static thing. The economy is a dynamic thing. And, and, um, yes, today, 400 million jobs, uh, projected. But that can be changed. And that is mostly changed by an active labor policy, by identifying what are the industries where despite technological progress, jobs will be created. And to give you a few analysis, a few examples, for example, the World Bank has shown that in the domain of care and health care, in the domain of agriculture, in the domain of tourism, even with an accelerated impact of AI, these are still industries where there is a lot job creation that will take. that will take place. It's also important to notice that we want jobs to be created, but we also want these to be jobs that create a decent income. To have a decent income, and that's crucial because you have today millions of people who actually work, but who are working poor, so who are working but still living in poverty. To have a higher income, the only way of doing that is increasing productivity. Now, increasing productivity, technology is one of the ways to increase productivity. So we see a potential impact of AI, but from our perspective, AI is actually a great accelerator of development and could be something that supports the creation of jobs. On your first question, on the impact of the war, yes, obviously, food prices are high. That is linked to the fact that we have had problems with the supply of fertilizers to get them through the Strait of Hormuz. That is linked to the war, of course. We also know that in Ukraine today, there is thousands of tons of grains that today are blocked. And the energy prices are high. It is quite clear that what is happening in the Gulf region plays an important role to that. So it's the general instability. But it's the compounding effects of the three compounding effect of high energy bills and the impact of El Nino and the fact that the borrowing costs are very high. And we see that the the U.S. Treasury bill yields are extremely high in the United States, 5.3% today. Those three elements together, they compound and they put developing countries in an extremely difficult position. A lot of the fiscal space has been used to try to compensate for the high energy bills and the impact on food prices. On top of that, El Nino between November and February could have a very big impact with a lot of droughts we have seen in the past. And if as a country you need to finance yourself, it's actually more expensive than ever to finance yourself. So the compounding effect of those three is putting many developing countries in a very tough spot.

Thank you very much. Islam Anadolu.

Thank you very much, Mr. de Kruif. Islam Doro from Anadolu. I have two questions. One is you said the global economy is very resistant, but you also said that after 10/20 the poverty index raised, went up. Can you put more color on that, why there is this contradiction? And second question is That youth prediction, 400 million will have a job, but 800 million will not have a job, is this ratio is normal or may create some global crisis in the future? Thank you.

Okay. Well, again, let me start to the last question. No, this is not the regular ratio, but this is the impact of demographics. And what we are seeing is just a very numerous generation that, in many countries, the median age, many of the developing countries, the median age is somewhere between 18 and 25. So there is a big part of the population that we know Now, this is just clear demographics is going to graduate between the next 10 and 15 years. So there's a big chunk of young people to whom we've told, you know, if you study well, you will get a job. And we know that with the current projections, job creation is not keeping up. But as I said, I mean, that's not a fatality. Good policy, economic growth, functioning institutions, all these things can help to increase the job creation. And we know that that is going to be gradual in the next year. But we should know that 800 million in the next 10 to 15 years, I mean, that's approximately every year. the number of young people equal to the inhabitants of Germany that each year will be added to the labor market. So it's quite a challenge. On the first question, yes, so the economy, the worldwide economy in aggregate is more resilient than expected. But underlying, you see that there is a group of countries, and you could broadly say because these are the developed countries, that they're seeing the positive effects of investments in AI and productivity growth thanks to AI. On the other hand, you have another group, and that is a larger group of developing countries that do not see the benefits of AI so much, and that feel the compound impact of the three things that I just mentioned. And so there is an on average thing, but there is two movements. There is one movement where The impact of productivity growth and investment is there, but on the other hand, you start seeing the impact related to multidimensional poverty for people who were just lifted out of poverty in the past decades and now are being pushed back into poverty. And if this continues in the months to come, we expect that effect to be further accelerated.

Thank you. Muna.

Thank you very much, Mr. de Kruif, for your time. My name is Muna Awtul. I'm with Al Quds Al Arabi. You know, as a former head of state, how difficult it is to turn financial commitments into real projects. You mentioned in your opening remarks that an agreement was signed with the World Bank. So if you could please give us a concrete example on how UNDP is going to use this framework, this agreement that was signed to mobilize investments specifically to, as you mentioned, create jobs and, and also to, um, grant access to reliable energy for schools, and thank you again so much.

Okay, so the framework agreement between the World Bank and UNDP really is one where both of us bring to the table what we are strong at. I mean, what the World Bank is strong at, obviously, is their financing and their lending capacity, the macroeconomic analysis that they do. What UNDP is strong at is policy reform and making sure that those policy reform in the end are implemented and really make a difference. And that often is the obstacle before the World Bank can start disbursing their funding. So we're going to be working on 3 domains. One is upstream policy work. Very often reforms are necessarily related to rule of law, financial infrastructure, financial legal framework. That's one element. The second element is that UNDP is putting its network, we have a network in 170 countries with long-standing, long-lasting relationship with local governments to open that up to make sure that those reforms can get implemented. And then the third domain in which we'll be working together is in sovereign bond operations, where we bring both our skills together. What we see today is that the opportunities for investment, and you mentioned renewable energy, definitely the opportunities for investment in renewable energy, they're there, because renewable energy is today very attractive from an economics point of view and from a geopolitical point of view, also very attractive. Financing is there. We know that multilateral development banks and international financial institutions have funding available. That funding today is not flowing at the speed that it could. That's very often because countries are what we would call not investable. The level of trust is not there. The legal framework is not there, but there as well. I mean, that's not a fatality. These things can change. And we at UNDP have the tools to make those reforms happen and to support the World Bank in doing what they're best at, which is financing projects to reduce poverty throughout the world.

Thank you. Linda.

Thank you, Steph. My question is, Apropos of previous question, what it is is how prevalent is corruption these days in parts of the developing world, and how much of an impediment is it to creating new jobs? You mentioned that certain I believe you mentioned that there are certain countries that are not investable. Can you just elaborate on that a little bit, please? Thank you.

Look, I can't really go in detail because that situation is different from country to country. Corruption is sometimes one of the factors, but I wouldn't say that this is the dominant factor. Very often the dominant factor is, for example, institutions that are not functioning, for example, because the country is coming out of a crisis. And very often, when you come out of a crisis, institutions are not functioning, or sometimes a legal framework which is not up to date to the current needs for investors. And, of course, making sure that in a country, when you have an issue, that you have legal instances that can work in full impartiality. This is one of the elements. But if today we look at what are the major impediments, I wouldn't on average, put corruption as the number one element. There is, unfortunately, many other elements that are making investment difficult. But all of these things can be solved, and they can be solved through reforms and through local leadership. And we see that more and more countries are contacting us and understand that public funding for development is decreasing, but they also see that there is more investable capital than ever. with international financial institutions, but also domestic capital. For example, raising domestic capital, for example, through an efficient tax collection, is one of the best ways of financing your own development.

Thank you very much. I don't see any questions online. Alexander, thank you very much. Thank you for staying up late. We wish you some successful meetings in Bangkok, and please come back soon. Thank you.

Thank you.