The Global Economic Outlook

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Sara Eisen, Anchor, CNBC

Good morning, everybody. Welcome to the grand finale, we end Davos on a high note here. And I'm so excited and honoured to be here. My name is Sara Eisen. I'm a host at CNBC. And we are going to have the conversation everybody's been waiting for the global debate and the global outlook on the economy.

Obviously, we have a tremendous lineup here. We have Faisal Alibrahim. He is the Minister for Economy and Planning in Saudi Arabia. Thank you. Larry Fink is the CEO and Founder of BlackRock. Christine Lagarde is the president of the ECB. We have Kristalina Georgieva, who is the head of the IMF, and we have the president of Singapore, President Tharman Shanmugaratnam. Thank you all for joining us.

You know, this Davos has been very interesting. Larry, there's so much optimism around President Trump and pro-growth policies and the US outlook. I sort of wonder, as an asset manager and a risk manager. Like, should we take the other side? Are you worried that everyone's too excited right now? Larry got me?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

It's hard to hear.

Sara Eisen, Anchor, CNBC

Oh it's hard to hear?

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

This is why we are putting those things.

Sara Eisen, Anchor, CNBC

Okay. I was just asking you if there's too much optimism around the US outlook right now and whether that was worrisome?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

Well, welcome, everybody. Thank you, Sara. Now, I can hear you. Is there too much optimism in the US? No. But that being said, there's risk in every economy. I can say much more forcefully. There's too much pessimism in Europe for somebody who's been pessimistic Europe for like 10 years. If I had my number one observation this week in Davos, the pessimism I've never felt, you know, the pessimism has been larger and more profound. And I believe it's probably time to be investing back into Europe, focusing on it. I mean, I see all the problems in Europe. But I do believe the pessimism is too large. There's many things it needs to do. It needs a banking union and a capital markets union, which I could talk about later on.

But back to new back to the United States. I think all the ingredients for United States is it will be the continuation of its strength, the foundation of its capital markets. Any entrepreneur, any small company, any large company can find capital. And that foundation of capital raising allows much more entrepreneurialism, much more creativity. And so I believe the US has the ability, because of its strength of its capital markets, which is slowly, really underappreciated, allows it to rebuild itself, change directions, modify faster than any economy in the world. And I do believe the economy obviously changes depending on the political party and the President. But the reality is the economy is larger than any one political party or any one President. Obviously, they could be additive to any economy. And, you know, President Trump's policies, if he were able to unlock private capital and put private capital to work faster, easier, with less regulation, less time for permitting. It would allow the US to become less dependent on its own fiscal problems. And so those are some of the issues that could be worked out. So now there's not too much optimism in the US, and there's probably more to be optimistic here in Europe.

Sara Eisen, Anchor, CNBC

President Lagarde, I bet you didn't expect to kick off the panel with a vote of confidence for Europe, because what we've been hearing here a lot is Europe's economy is underperforming. The Trump factor is going to be bad for Europe. How have you digested all of this?

Christine Lagarde, President, European Central Bank

Well, good morning to everyone. But I was going to say to Larry that if ever you look for a pro bono job, come and join us in Europe, because you advocate Europe in a beautiful way. So given where I am, the fact that in my quiet period before the monetary policy week, a decision coming up soon, I would just like to underscore what Europe is good at. And if I look at the scorecard at the moment, whether you look at debt to GDP, about 80% overall deficit for the Euro area, about 3%. Inflation, latest reading 2.4% and strong confidence that it's going down rather than up. Interest rates, 3%.

Huge amount of talent. Huge amount of savings. And a big wake up call that is really calling the Europeans to action. So if the European leaders can actually get their act together, respond to this wake up call and existential threat that can be identified, then I think that there is a huge potential for Europe to respond to the call. Well, I'm also pretty optimistic. I'm a realist about the points that Larry made. We need banking union. We need capital markets union. We need to keep the talent at home. We need to keep the savings at home. And maybe it's also time to import a few of the talents that would be disenchanted for one reason or the other from another side of the sea.

Sara Eisen, Anchor, CNBC

Just quickly, why do you call it an existential threat? Why is it existential right now?

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

Why is it? Well, because, as Larry was suggesting, if you talk to the CEOs, if you talk to the corporate world at the moment, those that are making major investment decisions, they are not very upbeat right now. And when you ask them why they are not making reference to the price of energy. Fair enough. But energy costs are going down as the recycle, and non-fossil energy is going up in Europe in a significant way. When you consider that electricity production in the Euro area at least is now 70% non-fossil originated. They complain about the excessive red tape and the excessive bureaucracy. That's the wake up call that we Europeans, those in policymaking places, have to really take to heart and respond fast, too.

You know, there was this great incentive to go and invest in the United States because of the Inflation Reduction Act and the significant subsidies that were going to be given to those who invested in the US. I think the IRA has essentially been removed and that any subsidies under the IRA will not be paid out. So people are going to have to rethink with the prism of confidence, with the prism of cost, as is often the case and the prism of opportunities. And there is no question that what is happening outside is a challenge, but it's also a big opportunity for revisiting and deciding whether or not Europe wants to be a key player. But I'm contending that it has the talent and it has the means and it has the ambition.

Sara Eisen, Anchor, CNBC

Well, we're going to talk about the IRA. And I know President Tharman has a lot to say about industrial policy. But first, M.D. Georgieva, if you could just give us a global overview right now, because you guys just put out your big world economic outlook. And yes, while there's a lot of optimism and solid growth in the US, it's a little lopsided around the world.

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

Well, great to be on this panel. We published our projections for 2025 and 2026 just before the Forum. And what they paint is a nice picture with some undertones. Nice picture because we project growth at 3.3% this year and next. This is a slight upgrade for 2025. But under the hood of this average number, we have very strong performance for US. We actually upgraded growth projections for US by half a percentage point from 2.2 to 2.7. And we have sort of not great European performance. And then we have the rest of the world more or less a little bit up, a little bit down.

The most important message I have for the audience is to ask the question, why? Why growth in the United States is so strong, why growth in Europe is somewhat underwhelming. Why the emerging markets are not doing fantastically well. And the answer is primarily in the differences in productivity growth. The US is marching ahead with high productivity because capital markets allocate money to dynamic firms, because technology turns into business investment and then it grows into company fast. And because the US has, relatively speaking, abundant, relatively cheap energy. When we look at productivity in the United States. Year after year after year is close to a percentage point. You look at the rest of the world. Advanced economies dropped in productivity vis a vis prepandemic times from over 1% productivity growth. And it pushes growth up to a meagre 0.2% now. Even more worrisome in emerging markets productivity dropped from 2.5% to 0.7% and in low income countries from 2% to 0%.

So my first message is the world is changing very rapidly. We are experiencing a tremendous technological transformation. Capital has to have long legs and go where it would make the biggest difference. And you look at capital, where did capital go with its long legs? It went to the United States. And if countries want to move forward, they have to be very aggressive in opening up opportunities for enterpriseship. And yes, Europe has to have deep capital markets. It has to have a unified market that makes it possible to compete. And I want to say, I'm a European. I'm a proud European. As a European, I want to make an observation in terms of culture. The United States has a culture of confidence. Europe has a culture of modesty. When I first went to the United States, I went there, if something is done really fantastically well, my parent would say “not too bad” that was the highest praise. In the US you just move your legs and you're fantastic. You blink and you're great. So my advice to my fellow Europeans is more confidence. Believe in yourself and most importantly, tell others that you do.

Sara Eisen, Anchor, CNBC

Good message, President Tharman. You know, everybody's wondering how, you know, the Trump Presidency, which is so focused on economics and has so many changes from the prior regime, is going to change the outlook for their respective regions and economies. How are you thinking about it? For, Southeast Asia, emerging markets, the regions that you follow.

Tharman Shanmugaratnam, President of Singapore, Office of the President of Singapore

Well, just first, let me say, and I don't want to be a spoiler here. If you look at all the evidence on what ordinary people think and feel, they're not feeling good in the US, in Europe, everywhere in the world. Confidence is down. Optimism is down. Trust is down. So real task is how do we rebuild the basis for optimism in today's world? We're not going back to the era when the Bretton Woods institutions were formed. We're not going back to an era where Henry Morgenthau, the US Treasury secretary, said in Bretton Woods, “prosperity is indivisible”. Just think about that. Prosperity is indivisible, meaning I can't prosper unless you are prospering. No one nation, even the largest, will prosper unless the rest of the world is frostbitten. We're not going back to that era. It's past us. It may have rested on a moment in time when the US had an unassailable lead and had that confidence to say prosperity is indivisible. But what we've got to avoid is going to the other extreme of a real zero-sum world. And there's some tendencies in that direction, but I think we are nowhere near it. We have to avoid moving in a gradual, grinding way towards fragmentation and towards some breaking up of the world into blocks. It's a real risk. So what do we do? Using all the agency we have. The middle powers India, ASEAN, Europe, Japan, the international institutions. What we do in between those two extremes, between the unattainable ideal of prosperity, being indivisible and avoiding at all cost a zero sum world. There's a lot we can do. There's a lot that we can do. But start from the reality that there are strengths in each of our nations. Very well described.

The US has a unique set of markets and institutions that drives innovation in a way that no other nation or region does. And as Christine says, Europe has human capital. And I mean not just in terms of expertise, but in terms of values. It's a font of the values that we admire in today's world. Asia has a desire to keep opening up, to keep breaking barriers. Asia is still striking FTA deals and you now have the UK joining the CTPP and there are several others on the waiting list. So build on these trends. The desire on the part of most of the world to stay open, to be interdependent so that we can all grow. So let's build a realistic basis for optimism. But starting from a position where people are despondent and today's generation of parents has very little faith in their children doing as well as them. Let's build new bases for optimism.

Sara Eisen, Anchor, CNBC

I don't think you'd have any disagreement on this panel, though. I wonder if you have spoken yet with President Trump. Or your prime minister has. Have you shared this view of openness?

Tharman Shanmugaratnam, President of Singapore, Office of the President of Singapore

W ell I'm saying something which comes naturally to a small country. I know of other small countries that think alike, including small European countries. You know, being small helps because your basis for doing well in the world is to be relevant to the rest of the world. You never look inward and you never get too complacent. You never get too complacent. You're always trying to find a way in which you're complementing someone else's strength and someone else is able to complement your strength.

But I don't think that should be the province of small countries alone. We have no choice but to have that cast of mind. I think it also has to be the way in which the major powers think. And in particular, I mean, if there was one real positive coming out of President Trump's speech yesterday evening at the Forum, it was the way he spoke about China and the US. It suggested a desire for a new understanding. And a desire to avoid continuous unravelling of a relationship that is still profoundly important for the global world economy.

Sara Eisen, Anchor, CNBC

Your Excellency, two important questions. So in that speech here at the Forum, President Trump called on Saudi Arabia specifically and OPEC to lower oil prices. Will you do that?

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

So before I answer this question, I'm just going to comment on what was discussed.

Sara Eisen, Anchor, CNBC

I was I was going to move on to that as well.

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

But I'll get to your question. I think the way we look at the world is in two lenses. One is data driven to kind of explain to us why we're here, how we got here, where exactly we are. But also another lens that is more future focused. What is the potential we need to unlock seriously? If you look at the first lens, like Christine said, there's tepid growth, but also at the same time, we the same people talking about tepid growth are talking about the potential positive promise of technological advancements and including generative AI. This economic stalemate needs to be addressed or disrupted. We can't stay here. Keeping an eye on the on the second lens. The vacuum is like we've discussed probably throughout a few days, the past few days, is intrepid leadership. We need intrepid leadership that is bold but inclusive, disruptive, but constructive, engrained in the long view, like President Tharman said, but also action oriented today to kind of get us out of where we are.

And you see signs of hope or signs of signals that there are directions or momentum in the direction of more leadership that is required for us to get out of where we are from. Saudi Vision 2030 is an example of that. You talk about complacency, President Tharman, I think every day, day in, day out, complacency in Saudi is punched in the face by Saudi youth. We need to make this transformation count. And every region, every economy has its own issue to deal with, whether it's European deregulation, for example, or innovation, the US and the fiscal outlook. China and this new economic model and whether a shift to consumption drive will happen, the Middle East instability and the need for more Vision 2030s. I think there are some pressing questions that the globe needs to address too, and one of them is energy security or the energy transition. I don't think we can get or can afford not getting the energy transition story right this time. We need to get it right – energy supply, energy security is essential for global growth, for global prosperity.

The Kingdom's position, OPEC's position is all about long term market stability to make sure that there's enough supply for the growing demand and there is a growing demand, whether it's the growing demand we see in the US alone, whether it's a growing demand that's coming from AI, demand will grow and we need to make sure we supply energy in the most efficient way without jeopardizing energy supply, without jeopardizing our ability to use technology and collaboration to address climate change, which is serious. Saudi Arabia is in the front line. We're in the most one of the most heat stress, drought, stress areas. So we're serious about climate action and without jeopardizing giving the opportunity for developing countries and emerging countries fair access to the value of energy.

Sara Eisen, Anchor, CNBC

What about your transition since you are the Minister of Planning. How dependent at this point is the economy on oil? Because the IMF did downgrade the outlook for Saudi Arabia based on the extension of the production cuts? And how are you tracking toward your goal of 2030?

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

So Vision 2030 is a long term restructuring of the Saudi economy. It's not a short term campaign. It's not a short term program. And we look at our numbers, GDP numbers as one of the indicators that tell us where we're going. We care about the non-oil economy. Non-oil activities today represent 52% of total real GDP for the first time. It’s not everything, it’s just a good sign to keep in mind. And non-oil growth has been steady. We expect to close 2024 at 3.9%, 2025 at 4.8%. Non-oil growth in 2026 at 6.2%. And that's what we care about. The numbers that were revised down are the total GDP that includes oil, GDP, that includes the function of oil production and our voluntary cuts. What we really care about is transitioning from one economic structure that's reliant on resources to another economic structure that's reliant on productivity, human capital. And we're leveraging all our assets and capabilities to transition from one to another.

Sara Eisen, Anchor, CNBC

One more really quickly, because this was also brought up by the President yesterday, a big $600 billion commitment to investment in the United States from the Crown Prince. How about rounding it up to a trillion, as Trump suggested? Is that easy to do?

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

I will tell you that there is a long standing, strong partnership between the US and the Kingdom that lasts so far, eight decades. We've worked very well on important work, global work with all administrations, no matter which administration is in office. This number represents investments, procurement, public and private sector, and it's just a mirror reflection of the strong relationship what we'll spend in the economy from the start of vision 2030 till 2030 is 12 times that number.

Sara Eisen, Anchor, CNBC

Well, that might satisfy him. You know, you can have a global discussion these days without talking about inflation or that's been the case in the last few years, certainly. Managing Director, have we put the inflation genie back in the bottle?

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

Well.

Sara Eisen, Anchor, CNBC

President Lagarde just sounded pretty optimistic.

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

So that is a very, very good question. Here is the bottle. Here is the genie. The head of the genie is in the bottle. Most of the body of the genie is in the bottle.

Sara Eisen, Anchor, CNBC

Kind of getting stuck there, though.

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

But the legs are kind of hanging still out. We need to push it all the way down. And it is remarkable how much progress the world has made. And I want to say something that we in our worries about today and tomorrow, we not always reflect. When we look into the past over the last decades, every inflation episode would require interest rates to go up. And the response would be inflation would go down. But at the price of recession. This is the first time so far when inflation is being brought down. Interest rates are still somewhat high. And yet we have admittedly below historic average, but still quite a positive growth – we have 3.3% – historical average was around 3.8%.

So when we look at the next stage, if we succeed. To bring inflation down and yet retain the economy functioning so people have jobs. And as Tharman said they get more confidence. That would be a very good outcome. And I want the audience to ask itself a question like how come this time it was different? What is different this time? What is different this time is twofold. First, after the global financial crisis the world created mechanisms for economic policy coordination that didn't exist before. We have the G20, we have very active role of the Bank for International Settlements. Every month, central bank governors get together. We had the IMF using our twice a year meetings for policy coordination. And what that translates into is more consistent xoordination when necessary, but also divergence in policies when necessary. And the second thing that is different, we have Madame Lagarde in ECB.

Sara Eisen, Anchor, CNBC

Larry, I feel like I keep reading headlines. Larry Fink warns of inflation. We're not done with inflation. Larry's very worried about inflation. Why?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

I'm not terribly worried.

Sara Eisen, Anchor, CNBC

But do you think the market's being too complacent about the inflation?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

No, I think the bond market is the best reflection of what's going on in the world. It is a barometer for every politician, for every central bank. It really informs us every day where the mood of the global economy. And I believe the bond market is indicating that inflation may be higher than we think. The genie may be coming out of the bottle. And I look at this in so many different ways. If you just think about AI for a minute in the United States right now, data centres represent about 50GW of power. And in the United States, we're estimating alone, data centres will represent and need 300GW of power in the next five years to meet the needs. And we're talking about, you know, if you expand that throughout the world, this is my optimism about growth. But at the same time we actually are going to have a labour shortage, which is going to be driving up wages. I think we're going to see more persistent wages, you know, in some, and that may be a good outcome. But we it's going to be an inflationary outcome. We're going to have material shortages with all this building out. And so I think we are somewhat complacent that that inflation can hit us again.

But I would also say if you look at where the bond market was even a year and a half ago and where we are experiencing very elevated inflation. We had a very inverted yield curve. The short rates were higher than long rates. What we are seeing now is this is a normalizing of the curve. But I also believe we're going to have a much more steeper yield curve. And that's a function of forward inflation expectations. And so one of my fears is because of this complacency and I have not even said the most ugly word that's facing economies, That's called the deficit and the debt, the debt of so many countries. When you think about the amount of capital that we're going to need to be financing all these amazing transformations, we have growing deficits worldwide. The cost of financing those deficits are going to go up. I think the yield curve is showing you that. And so, you know, I've said it repeatedly here in Davos. I could see a scenario. I'm not calling for it. And I can't see a scenario where we have a 5.5%, ten year.

Sara Eisen, Anchor, CNBC

And really quickly, do you think the Fed's done cutting rates this year?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

No, they still have room to cut. That will create a more steepening of the yield curve. So I think, you know, the next few months of data and information will identify it. I would say to you, the economy is very strong. It was very strong in the fourth quarter. And the evidence that we are hearing from different corporations that business is strong already in the first quarter. And so we have, and you see that in the labour statistics now. So they may pause for another period of time and they may ease a little bit. I'm not worried about the short term moves. But over the next year, all this materializes. You know, could they revert and go back up? Possibly.

Sara Eisen, Anchor, CNBC

Rate hikes?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

A rate hike. I'm not calling for that. But I always say that I see probabilities of that. That's not my core prognostication.

Sara Eisen, Anchor, CNBC

I'm trying to get a headline here Larry.

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

Yeah, I'm trying to avoid one.

Sara Eisen, Anchor, CNBC

Very good. Just on the inflation story, not everybody is feeling inflation right now globally. I think we should mention in the global context that China's been seeing deflation. Yeah, Mr. President. And I do wonder how you assess the Chinese economy right now and the outlook and the spillover effects globally?

Tharman Shanmugaratnam, President of Singapore, Office of the President of Singapore

Well, I think the Chinese will avoid an extreme aownturn. They know what to do. They're measuring the pace of the measures they're taking. To strengthen consumer spending to get past the property market overhang. They have an extremely complex task of achieving all this in an economy that's not a fully market based economy. But I think they will get their – growth might be somewhat slower than hoped. But I don't see a situation that leads us to a deflationary spiral. But more broadly, you know, central banks and fiscal authorities have made mistakes in the last 15 years that set us on a somewhat higher plane of inflation for the medium term then we otherwise would be. But the fundamental advantage we've had for several years now has been two things. The entry of China and some other parts of the developing world into the global labour market and global trading system and countries willingness to be able to absorb their products. It's been a tremendous deflationary force, counter inflationary force. But we're not past that. And we also have now an unprecedented situation of ageing in the entire developed world the West, Japan, increasingly China. The US is seeing stagnation in its population, even if it's not coming down. But you've got Africa, that's coming up. You've got India that's still growing rapidly, still a rapidly growing population.

So if you just think about that fundamental advantage we had for consumers all over the world in having an international trading system that allowed for emerging countries with growing populations and growing workforces and lower wages to be part of a global economy. How do we now replicate it in the next phase when we have the added disadvantage of ageing in the Western world and severe labour shortages that already exist in Europe, for instance, there's already a very severe labour shortage. South to North. What do we do about Africa? What do we do about South Asia and some other parts of the developing world? How do we have, if you like, a global industrial policy? So that we can benefit globally from higher productivity, but also a lower cost of goods for consumers around the world. I think that has to be an important challenge.

Sara Eisen, Anchor, CNBC

I think when it comes to the inflationary outlook, a lot will depend on trade policy with the US and tariffs, right? I mean, is anybody on this stage a fan of tariffs? No one thinks it's a good idea. I wonder, Your Excellency, when it comes to the trade battle, the fact that President Trump has indicated he's going to use tariffs to get fairer terms on trade or for national security reasons or for negotiations. How does a country like Saudi Arabia fit in when the US and China, for instance, have a have a deeper trade dispute or even a trade war? Do you find yourself in the middle?

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

I think we want to be in the middle, right? I think the Kingdom's position is to have a strong partnership with all of its partners and friends. And that's something that is a value proposition of the Kingdom that we want to grow. But on tariffs, I think depending on what objectives an economy has, it's been used as a tool. So long as it is objective, driven and time bound, you can an economy has the right to build resilience or leverage, or give space for the private sector to grow some competitive advantage or to invest in adding new competitive advantage so that a local industry can start.

So it's really about the details of tariffs, what it would look like, assessing its impact and then figuring out how to deal with it. The important thing is to keep dialogue on the table and keep the orderly, respectful discussion going and maintaining it, even if it's been absent for a while or not, where it should be and continue working on it. Kingdom values its partnership with all of its economies. Since Vision 2030, we've played an even larger role in more domains than oil and gas, diplomacy, and foreign aid and assistance. Because we understand better through Vision 2030 what our economy needs and society needs first, to unlock its potential.

Sara Eisen, Anchor, CNBC

Both with the US and China?

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

US and China, others.

Sara Eisen, Anchor, CNBC

President Lagarde. President Trump yesterday said that the EU does not treat the US fairly on trade and that he has some big complaints. Is that true?

Tharman Shanmugaratnam, President of Singapore, Office of the President of Singapore

This is a true or false question by the way?

Sara Eisen, Anchor, CNBC

Is it true that the EU has not been fair with the US?

Christine Lagarde, President, European Central Bank

There is no way I can say yes or no. Okay. What I believe is that he is looking very carefully at surplus versus deficit in the current account and in the trade balance, in particular focusing on that. And I think that you have to look very carefully under the hood, as Kristalina was saying, you have to look at the good exchanges, you have to look at the services exchanges, you have to look at the capital account. It cannot just be black and white. What is true is that there has to be negotiations. There has to be trade relationships that are organized in a framework that is giving confidence to the partners. It cannot be about, you know, removing all the rules, ignoring the institutions. The world does, what, 190 plus countries that are members of the IMF, the World Bank, the WTO, 191. And it's about all of us operating together, as Tharman said earlier on. So, yes, you sit at the table, yes you negotiate. Yes some countries are in a stronger position than others. But we all need each other.

If there is one thing that the Europeans have learned over the course of time since the end of the Second World War is that you cannot go alone. You have to work together. You have to respect each other and you have to understand each other so that you sit at the table and you work. And, you know, I would not say enough about the strength of -institutions – any literature that you have about stability, about economic equilibrium. Always reminds us that institutions have a huge value and that frameworks are here for players to know the rules of the game. And, you know, whether you look at trade, whether you look at financial regulations, I know that Basel III is in play, but there are values in having frameworks. There are values in all banks around the world learning and understanding and appreciating that having safeguards, having rules vis a vis each others actually matters, and the best can win. But within a set of rules, that's how the world has to operate.

Sara Eisen, Anchor, CNBC

A lot of agreement here in this room. Managing Director Georgieva. I mean, you don't like tariffs. You've been warning against trade friction at the IMF. You are the institution that advocates multilateralism. So what do you do in this environment?

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

What we do is we look at the evidence and here is what we find. It actually confirms that Saudi Arabia has the right strategy. We have been seeing over the last years increase in protectionist measures, tariffs as well as industrial policy measures. And we have seen countries gravitating towards politically aligned countries in their trade practices. And what the evidence shows is that trade among politically aligned countries is higher than trade across politically aligned countries. But guess which category of countries is performing the best? The countries that are friends with everybody.

So there is, in my view, what we are going to see over time is a reflection in trade and economic relations of a geopolitically changing world. More regional cooperation, more cooperation based on supply chains, more engagement that allows countries. To achieve their objectives. And in our institution, we look into how we can support regions, how can we work more closely with ASEAN? How can we work more closely with the Gulf Cooperation Council, so we can provide the analytical and policy encouragement for that kind of practical cooperation. I mean, look, we were many, many thousand years ago, just a handful of people on this planet. Today we are 8 billion. How did we get from there to here? Well, by collaborating and competing. And I think that there is no way we can wipe out collaboration from the future of humanity.

Sara Eisen, Anchor, CNBC

On that note, Mr. President. (I thought there would been applause for that.) On that note, Mr. President, you know, trade and industrial policy. As you just heard from the Managing Director, are very linked. You have some strong opinions here on industrial policy. I know.

Tharman Shanmugaratnam, President of Singapore, Office of the President of Singapore

Well, I think whether it's tariffs or subsidies or the other forms of the new industrial policies that are now in vogue. The fact is they are being driven largely by politics and geopolitics rather than by any powerful new understanding of economics. Any new evidence or any reappraisal of economics. And I think the jury's out as to whether this is going to succeed in lifting standards of living for ordinary people, for the middle class, and lifting economic performance for countries. It's happening by way of drift and tit for tat action. And we are in a very unstable situation now, quite frankly. So I think we have to take a step back. There is a case for industrial policy and it starts from recognizing that innovation is the key driver for long term growth – and innovation comes from capabilities. So the industrial policies that have succeeded in the past, I think are still entirely relevant, are industrial policies that involve developing your own capabilities, R&D skills, developing cluster synergies amongst firms, developing your own capabilities rather than constraining someone else's efforts to develop capabilities. It's about developing your own capabilities rather than constraining another country or the rest of the world. Because the difference between the two is that the first spurs innovation and it spurs innovation through competition. And the second stifles innovation and it stifles long term growth.

The second point, which is, you know, may seem old fashioned but is still entirely relevant, and all the evidence still supports the proposition that global interdependence and some specialization that each country engages in is good for everyone. You don't have to be a purist, you don't have to know what Ricardo said. But the fact is, we all do better when we specialize in what we are good at and develop skill in what we're good at. And it's very hard to depart from that. The whole history of import substituting industrialization, which we saw in Latin America, we saw in parts of the developing world and which we're now seeing in parts of the advanced world has not been a pretty history. In fact, in general, it has led to massive inefficiency, which means costs for ordinary taxpayers and big losses. So develop our own capabilities. Do it in areas where we have some advantage, some accumulated skills, some potential to succeed and develop skill and complement each other in an interdependent world.

There is a further very important case today for industrial policy, and that is we need to find ways of scaling up action on climate and that associated crises of biodiversity and a global water cycle that's out of sync, out of kilter. It requires the public sector, it requires state intervention to frontload investment, to be able to frontload even the demand for new innovations in green energy and all the other technologies that are going to get us to net zero. If you leave it to the markets, it's going to take too long, it's going to be too incremental. And in the meantime the turning points kick in in climate change, and we get into a much more dangerous world. From time to time countries will feel they can put climate action on the back burner. But climate change is not on the back burner for you or for anyone else. The more we put it on the back foot, the more we put climate action on the back burner, the more we burn in future, the more the costs are going to be to address the situation and the greater the inequality that we're going to face. So we've got to press ahead with addressing climate change. And it does require industrial policies involving public investment, involving subsidies, involving taxation policies, so that we build scale early and drive down the costs for ordinary consumers of new technologies. It's a very important contemporary reason why we need industrial policy.

Sara Eisen, Anchor, CNBC

So, Larry mentioned the D-word. Yep. Debt and deficits. And it's a whole other subject for another panel that we don't have time to get into. But I am curious, a show of hands, since we're talking about the global economy in the near term, how many of you put sovereign debt levels, high sovereign debt levels in your top five lists of risks for the global outlook? Everybody [all raise hands]. What about geopolitical tensions? Top five? [Tharman, Christine and Kristalina raise hands]. No. Why not, Larry?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

I mean, obviously it represents credit risk, so we always have to put that into your forecast. Look, at if we're going to really grow the economy of the world, it's not about focusing on really tariffs or all these issues. I agree with Tharman related to the industrial policy. But all of this, whether it's the deficits or transforming an economy, it's going to have to be done by hope. The more the global population is hopeful about the future.

There is more consumption in that environment. I mean, when we talk about China, what is trying to do? One of fundamental problems of China is it has the highest savings rates of any major economy in the world, 38% today it was as high as 50%. This is why they have to be more dependent on exports. I mean, so for China needs to be developing more hope within its country. And I think they're focusing on this right now. And if they could do that, they're going to have more domestic consumption. You know, we talk about tariffs and what do we do about it. You know, I can go back and look at Europe and say if Europe can solve its own problems, not focusing on the problems that that the US may impose on it, but focusing on their own issues. And Christine talked about it, it is about opening up the Capital Markets Union, the banking union, to make Europe really one single market. I mean, it's a myth right now. Europe is a myth. Okay? It's a beautiful myth, but it's not working. It is not working to compete.

Sara Eisen, Anchor, CNBC

President Lagarde is going to take back her invitation.

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

It's not working relative to the strength of the United States, the innovation of the United States, the entrepreneurialism of the United States, the ability to pivot. And then if you look at China's it's entrepreneurialism, its development. Europe needs to be in the same footing. And here we are now in 2025 or now 16 years post-financial crisis. And I don't see Europe moving forward enough. I see Europe still focusing on backward, looking too much. And but I do believe all of elements are there. And that's why I started off – I'm more optimistic. But in that with to be optimistic you have to admit your problems.

Christine Lagarde, President, European Central Bank

Okay.

Sara Eisen, Anchor, CNBC

Final minute. Yes, I know you must respond.

Christine Lagarde, President, European Central Bank

Okay, Fair enough. And that's exactly the good point about now is that it's provocative. So I think Europe is not a myth. Europe is not a basket case. Europe is a fantastic case for transformation. And I'm going to quote a report that was issued by the IMF, Kristalina, if and I agree with you on that, Larry, I agree. If Europe was a single market, as it claims to be, if it was, then it would remove the equivalent custom duties of 40% on its goods that are transacted within Europe and 110% of custom tariffs on its services.

So I agree with you that it is not operating and functioning as a single market. I'm not the author of the Little report – he pointed it out. And Mario Draghi is pointing out what needs to be done about it. The real question for the Europeans, as I have said, corporates and policymakers alike, is get on and do it. Okay.

Sara Eisen, Anchor, CNBC

We have one minute left. So that means like a short answer, really short like 10 seconds from everybody. We talked a lot about the risks inflation, tariffs, industrial policy deficits. One opportunity for growth in 2025 that you're thinking about? Mr. President?

Tharman Shanmugaratnam, President of Singapore, Office of the President of Singapore

I think the most neglected dimension of strategy, nationally, in most parts of the world is social policy. You need social policy on an industrial scale much more than industrial policy in the narrow sense. And that means maximizing human potential in every segment of the population. It means finding ways of recreating social compacts so that people feel some sense of solidarity, even between different ethnic groups, different nationalities. And it means, very importantly, thereby building the basis for political consensus to keep economies open and interdependent. And those three things must go together. The economic strategy of openness, the social policy of not leaving things to a social market, but intervening to help everyone uplift themselves and the politics that then allows you to carry on being open. If any one of those fails, each of them falls apart.

Sara Eisen, Anchor, CNBC

Managing Director?

Kristalina Georgieva, Managing Director, International Monetary Fund (IMF)

Remove these self-inflicted injuries. There is so much that is on the way of productivity and growth that comes from red tape, comes from misguided policies, comes from poor implementation of good policies, that has to be taken out. And I know you say one thing, but I have to say two: make sure that artificial intelligence is not a privilege of the few and is accessible for the rest of the world.

Sara Eisen, Anchor, CNBC

President Lagarde?

Christine Lagarde, President, European Central Bank

I would second what Kristalina just said. I think that we have not discussed very much artificial intelligence – it has been much discussed at the at the World Economic Forum this week. And we are not exactly certain what the potential is – we think that it's huge. We believe that it is going to have massive impact. And I think we should make sure that it's used for good to improving the state of the world and the world for all of us.

Sara Eisen, Anchor, CNBC

Larry?

Laurence D. Fink, Chairman and Chief Executive Officer, BlackRock

You know, we spend so much time focusing on all the problems and when we discuss problems we solve problems. So I believe it is a great process discussing problems because we solve problems. But because we solve problems, there should be even greater hope. I mean, the world is better today than has been 10 years ago, and 20 years ago, we lifted more people, there's more opportunity, there's more technology transformations. Some of it is very fearful. But I just look back at the last 20 years. And I'm more hopeful today than I've ever been. And it is our responsibility to provide that hope to everybody and lift more people.

Sara Eisen, Anchor, CNBC

Your Excellency.

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

So the reason I didn't raise my hand earlier is because I think today we have more clarity in what we need to discuss and resolve. And there is signs of more optimism relative to where we were last year. So I'd say optimism by choice. Optimism is not just a gut feeling or a reaction to an environment. It could be a strategic decision. And like any decision, you can invest and then put in the hard work to make that investment reap its returns.

Number two is putting in the hard work. I think reform and transformation is not a 9 to 5 job requires people working night and day. I was asked by your colleague Steve before one of the panels, I don’t why know why he asked this, but he asked us what extreme sports we play. I blanked out, which is depressing. But then the first thing that came to mind was Saudi Vision 2030. Not because of what we're doing, but because of the so many young Saudi men and women who are working 12, 14, 16 hour shifts every day to make this transformation count.

Sara Eisen, Anchor, CNBC

Thank you all. And we end where we started with the optimism. And it's why it's been a really rich World Economic Forum Davos this year. Thank you all for participating.

And please stay seated everybody, because we have two more things before we close everything out. We have a very special, exciting, newsworthy announcement from His Excellency, from the Kingdom. And then if you would, stay seated right after that, we are going to hear from the World Economic Forum President. Please.

Faisal Alibrahim, Minister of Economy and Planning, Ministry of Economy and Planning of Saudi Arabia

I'd like to start by first thanking Professor Schwab, Borges and the entire World Economic Forum community for putting on another hugely successful Annual Meeting. Last year in April, the Kingdom of Saudi Arabia in the World Economic Forum hosted a very successful special meeting in Riyadh. Under the patronage of his Royal Highness, Crown Prince and Prime Minister of the Kingdom of Saudi Arabia, Prince Mohammed bin Salman.

And now building on the success of this meeting, Saudi Arabia and the World Economic Forum are happy to announce that we will host a regular World Economic Forum global meeting in the Kingdom. This is a testament to the global platform for dialogue, collaboration and innovation. The Saudi Arabia has become and that the World Economic Forum continues to be. This meeting represents a significant opportunity to further unite the world in capturing the immense potential that lies ahead. In this critical juncture for the global economy we are not only inspired by the opportunities before us, but also deeply confident that our collective efforts will forge a brighter, more inclusive and more prosperous future for all. We look forward to welcoming the global community again in Saudi Arabia in the spring of 2026. Thank you very much.

Sara Eisen, Anchor, CNBC

Thank you.