♪♪ >> Hello and welcome to "GZERO World."

I'm Ian Bremmer, and this week we check under the hood of the international economy.

Let's just say it's time to visit a mechanic.

Luckily, both my guests are leading global efforts to try to get inflation under control to lift millions and millions out of extreme poverty and to prevent the next global recession.

Whether they'll succeed, very much an open question.

I'm talking first with Kristalina Georgieva.

She's managing director of the International Monetary Fund, the IMF, and later with David Malpass, president of the World Bank.

Don't worry, I've also got your "Puppet Regime."

>> Who wants to go next?

Anyone?

>> [ Grunting ] >> Anybody?

>> [ Grunting ] >> But first a word from the folks who help us keep the lights on.

>> Major corporate funding provided by founding sponsor First Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth-management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by... ...and by... >> Unity in a time of crisis.

That's the cheery theme of this year's annual meetings of the International Monetary Fund and World Bank.

COVID-19 has forced 70 million more people into extreme poverty.

War in Ukraine has threatened energy and food supplies around the world.

Inflation still not under control.

Any one of these events would be enough to put a serious strain on the world's economy.

Put them together and we get some grim predictions about the road ahead.

The IMF projects that global growth will slow from 6% in 2021 to 3.2% in 2022.

2023, a further slump at 2.7%.

The fund says that with the exception of the 2008 financial crisis and the worst months of the pandemic, this is the weakest growth the world has seen in decades.

Global inflation is also forecast to finish 2022 at 8.8%, but hopefully settle in at around 6.5% in 2023.

Still not great.

And efforts to combat inflation in the developed world could spur a debt crisis in the developing world.

Optimism for speedy economic recovery after the pandemic has faded almost completely as Putin's war in Ukraine put lots of pressure on global supply.

In fact, United Nations Secretary-General António Guterres worries that without a de-escalation of the conflict and without increased production of fertilizer going along with it, the world will not have enough food in 2023.

And we haven't even gotten to climate change.

Catastrophic flooding in Pakistan left a third of the country underwater, and then Hurricane Ian tore through Florida and wiped out whole communities.

There's no slowdown on the climate disasters that are coming our way.

The IMF predicts that fast-tracking the transition to green energy will bring huge benefits when it comes to energy security and climate-change costs, but doing that is going to take a huge global effort.

And especially given the economic state of affairs right now, it's unclear if our current leadership is up to the task.

My guests today have a lot on their plates and they're worried that a recession could be imminent unless collective action is taken now.

Will we find any unity in our current time of crisis?

It's the IMF/World Bank annual meetings, so we're talking to the heads of the IMF and the World Bank.

Sounds about right.

Let's begin with Kristalina Georgieva.

She's managing director of the IMF and here's our conversation.

Kristalina Georgieva, thanks so much for joining us on "GZERO World."

>> Thank you for having me.

>> I want to start, of course, with the fact that the global economy seems to be getting worse.

Is a global recession now inevitable in your view, and if so, why?

>> Well, the risks of global recession have gone up and the reasons are three.

One, we have all large economies slowing down at the same time.

Eurozone, because of Russia's invasion and high gas prices.

China, because of omicron disruptions and the housing sector, the real-estate sector in trouble.

U.S. still holding relatively better, but the momentum is towards slowdown as well.

And that takes me to the second reason -- inflation.

High inflation means tightening financial conditions and higher interest rates are a drag on consumer demand, they're a drag on investment, making the slowdown more likely.

And the third reason we are a bit more concerned about the future is fragmentation.

The world economy is finding it harder to have solutions to common problems in this environment.

>> Now, usually, at least when we talk about China historically, when things go badly, the ability of the Chinese government to throw a lot of money at the problem, kick it down the road and ensure that there's growth and stimulus, we often see that.

We certainly saw it coming out of 2008.

First of all, do the Chinese have that capacity this time around, and secondly, are you starting to feel more optimistic for 2023 about them finally getting out of this zero-COVID, stop-start, stop-start?

>> The answer to the first question is yes.

China does have policy space and we have seen very recently that they're deploying 85 billion for their property sector.

But if you look at history, you would notice that China has three drivers to increase growth.

The first one is the real-estate sector, which even with the support it is getting today cannot be the same potent force.

The second one is infrastructure financing.

China has done a lot in infrastructure and municipalities are now under more debt than they were before.

And the third one is export, but export in a fragmented world has lesser potential than it had before.

>> Okay.

So that's China.

When we look at the Europeans, when I look at the electricity bills, my God, I mean 5X, sometimes 10X what they were a year ago.

I also have the Europeans telling me they expect it's going to be a lot worse in 2023 than it is this winter.

Is that your sense?

>> Yes.

Unfortunately, this is correct.

This winter, the reduction in gas supplies has caused this spike in energy prices.

And of course, oil has also been on the highest end of the price spectrum.

But Europe did have reserves and Europe has been able to cushion itself against a massive reduction and actually stopping gas supplies from Russia.

Would that be the case next winter?

Very likely that Russia would continue to use gas as a factor of response to what has been understandably a very strong reaction from the global community to a senseless war.

And therefore, we may see next winter to be even harder for Europe.

But the silver lining here is that Europe is going to accelerate its green transition.

This is so clear.

And for the world, this is really good news.

It means new technologies accelerating the deployment of existing technologies.

And if we are to take a brave step towards making it easier for private capital to go into emerging markets with these technologies, we may have a chance to buffer ourselves against the climate crisis.

>> Now, you bring me to the developing world.

I mean everything seems to roll downhill at them, whether we're talking about inflation, whether we're talking about the pandemic, whether we're talking about the Russian invasion, everything's hitting them the hardest.

Do you expect crises?

Do you expect literally that there's going to have to be dramatic intervention or we're going to see some financial collapse?

>> You are so right.

It is a cost of living crisis in so many places.

Hardest for emerging markets and developing economies for people there.

And don't forget.

When we talk about tightening of financial conditions for emerging markets and developing economies, this includes both interest rates going up, but also the dollar going up, depreciation of their currencies.

It translates into importing more inflation, making lives of people even more difficult.

So in this environment, you are also right to concentrate on food security because this is where the devastation for especially low-income countries is so dramatic.

We have identified 48 countries that are suffering from food insecurity, and I think next year may be even harder.

Why?

Because this year we had natural disasters, climatic disasters on all continents.

That is affecting agricultural productivity.

And we have prices of fertilizers going through the roof.

That makes it so hard for farmers in these countries to produce what is necessary.

At the IMF, we still have about $700 billion lending capacity.

We are seeing an increase in demand for IMF financing.

Since the war started, we have funded 18 programs or augmented programs.

This is about $90 billion, just in this short period of time.

We have to brace for more shocks to come, anticipate them, be ready, act early.

>> Okay.

Last question for you, and it can be a quick one.

I saw you give a speech recently at Georgetown.

You said that we can survive recession, we can survive inflation, we cannot survive unabated climate crisis.

Kristalina, how much progress have we lost over the last year?

How much progress have we lost because of these crisis, particularly the Russian invasion in responding to climate?

>> Well, you look at the emissions going up even when the economy's slowing down, so we have lost time, and the question is, are we eager to move to catch up?

And that is something that we have to press very hard for, Ian, because time is not our friend.

If we don't take the turn towards lower carbon intensity by the end of this decade, doesn't matter what promises we make for 2050 because we would not be able to meet them.

Now, I want to finish on a positive note.

We have created at the IMF, a new vehicle to support the green transition.

It is called Resilience and Sustainability Trust.

$40 billion committed for it.

And what gives me great joy is that the interest is very high.

That means emerging markets, developing countries, they know they have to deal with the climate crisis before it becomes a devastation.

>> Kristalina Georgieva at the IMF, thank you so much.

And of course, wishing you a very successful annual meeting.

>> Thank you.

♪♪ >> My next guest recently found himself in hot water over questions about the cause of a rapidly warming climate.

>> Let me just be as clear as I can.

Do you accept the scientific consensus that the man-made burning of fossil fuels is rapidly and dangerously warming the planet?

>> I don't even know -- I'm not a scientist and that is not a question -- So, Al Gore can -- I don't know why it stays on the stage.

What we need to do is move forward with impactful projects.

>> So I asked World Bank president David Malpass about that and also the road ahead on both climate financing and our global economy.

David Malpass, president of the World Bank.

Thanks for joining us on "GZERO World."

>> Hi, Ian.

Good to see you again.

>> Thank you.

I got to start with the elephant in the room.

Can you just sort of clarify that you are not a climate-change denier?

>> Sure.

I'm not.

It's clear that greenhouse gas emissions from human activity are causing global warming.

The World Bank is in the middle of many of the most important issues in climate change and staff are working all over the World Bank.

Massive effort, massive financing.

The World Bank is the biggest worker on climate change now.

That means more financing than other sources in the world.

That also means more diagnostics, which are really important as people try to focus their priorities.

We're pushing hard on reduction of greenhouse gas emissions.

As you think about it, the impact actually how people do that is the biggest challenge and what a lot of people are trying to duck.

I really want to get us from the conference mode to the actual project mode and impact as far as reducing greenhouse gas emissions.

>> You and I have known each other for a long time, and the fact that you just said that is not in any way news to me.

Were you just irritated on the day?

I was just kind of wondering what was going on.

>> Yeah.

I'm not into name calling.

I'm not very good at that game.

I was there to talk about impact on climate and for whatever reason that was the start of that event.

Best is to move on and also not distract attention of the world from the actual task at hand.

That's where we are at the World Bank.

We have people working all over the bank, really hard, on fast deadlines, and so I want to keep that work going on.

>> So let's talk about projects.

And this year, of course, we are seeing considerably higher carbon emissions than we saw last year, and a big piece of that is because of the massive disruptions that we've had from the Russian invasion into Ukraine.

I am also seeing that banks are increasingly moving back into fossil fuels because they can get short-term returns and because a lot of countries just need energy desperately.

How bad is that situation?

How much of a reversion are we seeing?

How do we address it?

>> This is a real concern.

It's happening right now.

So more and more countries are reopening coal-fired power plants.

Europe is scouring really the world for coal and for more natural gas.

That has consequences because the natural gas is a critical input to fertilizer and to food.

And so there's consequences and trade-offs being made really every day as they fill their winter storage with natural gas.

I want people to look ahead to next year and the following year as well.

There has to be a better way to have fertilizer production.

One of the concerns is it looks as if Europe is moving away from producing fertilizer in Europe and instead buying it, which creates shortages elsewhere in the world.

So these are very real topics and massive problems.

But I want to come back to Ukraine itself.

I met with President Zelensky in Munich.

We moved very fast in March and April with World Bank resources for Ukraine to keep the administrative functions of their government running and then quickly used all of our various tools within the World Bank Group to make available channels for other countries to support Ukraine.

So we've been the biggest conduit for the support coming in from the United States, from the U.K., from the European Union, from Japan, and others in making resources available.

We've disbursed -- Just since those initial March and April disbursements, we've dispersed $11 billion to the various functions of the Ukraine government, with more every week.

The bank did a major assessment of the damage in Ukraine, which came out last week showing some $350 billion of damage already, plus $150 billion of ongoing needs in Ukraine.

They think people are trying to put that together, but there's a lot of different threads going on.

>> Now, we've talked so far mostly about hangover from this continuing Russian invasion and war in Ukraine.

We haven't mentioned -- I haven't mentioned yet COVID, but I mean Biden says the pandemic is over, but of course in China that's certainly not true.

How much is the reality of the pandemic still impacting global supply chain, resource availability for the poorest countries and how's the World Bank responding?

>> We know China really had very strict lockdowns in the second quarter.

So their GDP on a quarter over quarter basis annual rate went negative 2%.

So that's a sizeable shrinkage that disrupted global supply chains.

They've loosened that somewhat, but there's still lockdowns going on, so that's one of the big impacts is the world's second biggest economy has had a later cycle with COVID than the rest of the world.

They're looking at vaccination techniques and I'm optimistic that the fourth quarter, that later this year and into next year, their supplies will be increasing.

Also, the world is diversifying from China as the critical supplier in so many areas.

And so that gives some prospects going forward.

>> Okay.

Well, thanks for humoring me on hitting COVID for a bit.

We'll go back to Ukraine.

There's no question Ukraine is getting an enormous amount of attention and increasingly getting an awful lot of money.

I want to ask you, honestly, when there's this much attention to a conflict that is this damaging, does it take a lot of the air out of the room?

Does it make it harder to get the kind of funding that you need for all the other challenges that aren't driving the headlines right now in developing countries?

>> There is some of that, but not as much as you might think.

For one, the bank is large and staff are working on lots of areas continuously.

And so I don't feel at all that we've taken eye off of the food crisis in Africa, of the climate-change crisis going on around the world.

So it's more -- the -- I would put more emphasis, Ian, on the problems are still coming off of the Ukraine war.

It means Europe, for example, is probably in recession and it's hard to dig out of that.

So the impacts on the rest of the world are coming from the deep slowdown that still is underway.

We're worried about it turning into a world recession next year because of the combination of inflation, rate hikes, supply chain disruptions, and the actual cutoff of resources from Russia.

All of that goes into concern about 2023.

>> Well, at this point, would you say that you think it is more likely than not that the world will be in recession in 2023?

>> I'd say 50/50 right now.

The bigger focus that I have and the worry I have is development itself.

Development is in crisis.

Many of the countries, whether middle-income countries or the poorest countries, are moving backwards in so many areas, in terms of education and health and food insecurity, but also in terms of capital flows.

There's a capital outflow.

One big number is the payment on debt by the IDA countries.

That's the 75 poorest countries in the world that are the recipients of large World Bank grants.

Their outflows, their payments on debt are $44 billion this year, which is more than all the world's development assistance resources.

>> So they're moving backwards.

They're literally moving backwards at this point.

>> They're moving backwards in terms of cash on hand, in terms of new investment and the infrastructure maintenance that's so critical to keep things operating.

My conclusion, or where I think we are at right now, is we have such a crisis in development that we need to be thinking about new pathways out.

That means changes in global capital flows that will work better for new businesses, for weaker countries within the capital flow structure, but that also means rule of law that will work better for the countries themselves.

>> David Malpass, thank you very much.

>> Thanks, Ian.

♪♪ >> And now to "Puppet Regime," where the changing of the seasons inspired a poetic state of mind among our felt little friends.

>> And now we return to World High.

[ School bell rings ] >> Alright, class, it's time to share our poems about why we love fall.

Let's start with President Xi Jinping.

>> Let's see here.

It's fall, back to school.

I glow with anticipation like a jack-o'-lantern burning with the flame of re-education.

>> Yikes.

Is that still happening?

Okay.

Who wants to go next?

How about you, Boris?

>> I thought he doesn't go here anymore.

>> I thought you don't go here anymore.

>> Listen up, chums, an Oxford man is declaiming.

Oh, noble, lifeless leaves drifting softly earthward bound, just as my successor is in free fall with the plummeting pound.

[ Laughs ] >> Um, okay.

Um, let's move on, shall we?

Who wants to go next?

Anyone?

>> [ Grunting ] >> Anybody?

>> [ Grunting ] >> Okay, Volodymyr.

>> Pumpkin spice latte, cardigan rustles in the wind, our struggle goes on.

>> Oh, a haiku.

Very impressive.

>> Fake.

What a total brown-noser, this guy.

Okay, losers.

It's my turn now.

[ Clears throat ] Seasons of mists and mellow fruitfulness.

Close bottom framed of the maturing.

>> Isn't that a poem by Keats?

>> What?

No.

Melania told me that Michelle Obama wrote this one herself.

>> Mnh-mnh.

Donald, this is your assignment.

>> Okay.

Okay.

I got to back up.

People are saying just a very sad season, worse if I get pinched for fraud or for treas-- Wait a second, what the -- >> Alright.

Sit down, Donald.

Okay.

Who's next?

Oh, Vladimir.

So nice of you to show up today.

Do you have your poem?

>> Nyet, but I will go off dome.

As foliage takes flame, are you sure your heat is running?

Oh, autumn herald of pain, remind them winter is coming.

>> "Puppet Regime"!

>> That's our show this week.

Come back next week, and if you like what you see, or even if you don't but you're worried about the global economy and you have no one that you can trust, you know where to go.

Why don't you check us out at gzeromedia.com?

♪♪ ♪♪ ♪♪ ♪♪ >> Major corporate funding provided by founding sponsor First Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth-management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by... ...and by...