Lagarde in Davos: How to Avoid an Economic Deep Freeze

Posted on January 27, 2012 by iMFdirect

By iMFdirect

Amid the heaviest snowfall in Davos for decades, IMF chief Christine Lagarde has been making her case for urgent action to resolve the eurozone crisis, which is at the center of current global economic concerns. The Fund recently sharply revised downward its forecast for global economic growth and in a speech in Berlin Lagarde mapped a way forward.

Policy priorities

Lagarde has taken her messages to the Alpine resort in Switzerland, where global leaders are gathered for the 42nd Annual Meeting of the World Economic Forum. At the top of the agenda is the need to find and implement the policy solutions to avoid a downward economic spiral—or what Lagarde as has called a “1930s moment.” She set out some of the policy priorities in a video interview and stressed the need for policy action to be “coordinated, cooperative and comprehensive”. The main goal is to get growth going again “because that’s most needed. There is too much unemployment around the world,” Lagarde said.

Worldwide repercussions 

While Europe may be at the epicenter of the crisis, today’s economic difficulties are being felt in all quarters of the globe, so policymakers and leaders everywhere are responsibile not only “for making sure that their jurisdictions, their countries, their regions, but also the global community does better and actually can manage through the crisis.” For the IMF to play its part, the institution has called for a big increase in its lending resources. The “IMF is a guardian of stability and a builder of confidence. And there is a lot to be done at the moment, and we probably will need more funding to be able to respond to a time of crisis … because it is our membership at large that we care for,” Lagarde explained. She also spoke on Facebook.

Watch the video here:

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Emerging Markets, Employment, Europe, Financial Crisis, Fiscal policy, IMF, International Monetary Fund | Tagged: , , , , , , , , , , | 7 Comments »

How to Exit the Danger Zone: IMF Update on Global Financial Stability

Posted on January 24, 2012 by iMFdirect

By José Viñals

(Versions in  عربي, 中文, Español, Français, Русский, 日本語)

Since September of last year, risks to global financial stability have deepened, notably in the euro area.

However, over the past few weeks, markets have been encouraged by measures to provide liquidity to banks and sovereigns in the euro area. This recent improvement should not be taken for granted, as some sovereign debt markets remain under stress, and as bank funding markets are on life support from the European Central Bank (ECB).

Main sources of risk

Many of the root causes of the euro area crisis still need to be addressed before the system is stabilized and returns to health. Until this is done, global financial stability is likely to remain well within the “danger zone,” where a misstep or failure to address underlying tensions could precipitate a global crisis with grave economic and financial consequences.

Despite the recent improvements, sovereign financing stress has increased for many countries—with almost two-thirds of outstanding euro area bonds at spreads in excess of 150 basis points—and financing prospects are challenging. Markets remain very volatile and long-term foreign investors have sharply reduced their exposure to a number of euro area debt markets, including some in the core. Keeping these investors involved is essential to stabilizing markets.

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Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Europe, Financial Crisis, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

Driving the Global Economy with the Brakes On

Posted on January 24, 2012 by iMFdirect

By Olivier Blanchard

(Versions in  عربي, 中文, Español, Français, Русский, 日本語)

After the speech by the IMF’s Managing Director in Berlin yesterday, my main messages on the global outlook will not surprise you.

Starting with the bad news–the world recovery, which was weak in the first place, is in danger of stalling. The epicenter of the danger is Europe, but the rest of the world is increasingly affected.

There is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession.

Turning to the good news–with the right set of measures, the worst can definitely be avoided, and the recovery can be put back on track. These measures can be taken, need to be taken, and need to be taken urgently.

And now the numbers, starting at the epicenter:

The IMF’s forecast for growth in Euro Area for 2012 is ‑0.5 percent—this marks a decrease of 1.6 percentage points relative to our September 2011 projection. In particular, we predict negative growth in Italy (‑2.2 percent) and Spain (‑1.7 percent).

We have also revised downwards our forecasts for other advanced countries, although by less. Only for the United States, is our forecast unchanged at 1.8 percent.

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Filed under: Advanced Economies, Africa, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, Fiscal Stimulus, G-20, Global Governance, growth, IMF, Inequality, International Monetary Fund, Latin America, Low-income countries, Middle East, Public debt, recession | Tagged: , , , , , , , , , , , , , , | 7 Comments »

Meeting the Employment Challenge in the GCC

Posted on January 19, 2012 by iMFdirect

By Masood Ahmed

(Version in عربي)

The issue of how to create more jobs is high on the minds of policymakers everywhere. The economies of the six Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—are no exception.

By many measures, these economies are doing very well. Abundant oil and gas reserves are producing large budget and external surpluses, growth is up, and considerable strides have been made on social indicators.

Yet, economic activity is dominated by the oil/gas sector and—given that many GCC countries have proven reserves of at least another 50–100 years at current rates of production—will remain so. However, that sector creates relatively few jobs directly—it employs less than 3 percent of the region’s labor force.

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Filed under: Employment, growth, International Monetary Fund, Middle East, عربي | Tagged: , , , , , , , , , , , , , , | 2 Comments »

Remembering Michael Mussa

Posted on January 17, 2012 by iMFdirect

Sad to hear about the death of Michael Mussa, the IMF’s witty and trenchant former chief economist for nearly a decade, who resigned in 2001. He was 67.

Christine Lagarde, Managing Director of the IMF,  made the following statement.

The Wall Street Journal says the former Chicago University professor did not shy away from controversy. The Washington Post said he helped shape the IMF’s responses to financial crises in the 1990s. Later, as a senior fellow at the Peterson Institute, Mussa was well known for his semiannual forecasts of global economic growth, conveyed with tough assessments, clarity of expression, and biting wit. Paul Krugman said his most influential work was on currency regimes.

The IMF’s Research Department organized a conference in his honor called “MussaFest” to mark his 60th birthday in 2004.

Read more »

Filed under: Economic research, Globalization, IMF, International Monetary Fund | Tagged: , , , , | 9 Comments »

Sins of Emission and Omission in Durban

Posted on January 9, 2012 by iMFdirect

By Ian Parry

(Versions in  عربي, 中文, Español and Français)

As we slide into another year of tough economic times, it’s easy to understand why policymakers are preoccupied with the next few weeks. But they also need to be thinking about the longer term issue of leaving the planet in reasonable shape for future generations.

Without serious efforts to reduce greenhouse gases, scientists predict that by the end of this century global temperatures could be 2.5 to 6.0OC higher than a couple of hundred years ago. That could mean more heatwaves, more droughts, higher sea levels, more violent storms—and so on. When you start to think about the potential impact of, say, droughts on the livelihood of farmers, especially in poorer countries… well, you get the point.

While some progress was made in the latest round of United Nations’ climate change negotiations in Durban, South Africa, we saw two major omissions. There was little progress on either carbon pricing or, related, financing for action against climate change. And there was not enough recognition of what economics has to offer to help tackle the problems.

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Filed under: Advanced Economies, Emerging Markets, IMF, International Monetary Fund, Low-income countries, Multilateral Cooperation | Tagged: , , , , , , , , , , , | 4 Comments »

Trade Winds—Has the Spectre of Protectionism Blown Away?

Posted on January 5, 2012 by iMFdirect

By Tamim Bayoumi

The global crisis has pushed trade reforms off—or at least to the edge of—the political radar screen. But shying away from improving the trade system in these tough economic times seems a little like cutting off your nose to spite your face.

The IMF’s First Deputy Managing Director David Lipton summed the issue up in a recent speech: “trade wars can put millions of jobs in jeopardy, while trade integration can be an engine of growth.”

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Filed under: Advanced Economies, Emerging Markets, Globalization, growth, IMF, International Monetary Fund, Low-income countries, Multilateral Cooperation | Tagged: , , , , , , , , , , , , | 5 Comments »

Latin America: What’s Ahead in 2012?

Posted on January 4, 2012 by iMFdirect

By Nicolás Eyzaguirre

(Version in Español, Português)

A few days after the first sunrise of 2012 kissed the shores of Latin America, it is natural to ask: What does the New Year hold for the region’s economies, especially with Europe still under stress?

For sure, a dimmer economic environment, here and abroad. Growth has softened in the larger countries of the region. Looking North, the United States is growing a bit more, but elsewhere activity is softening, including in China—an increasingly important customer for the region’s commodities.

Perhaps more importantly, global financial markets are still strained, because many questions about advanced economies remain unanswered:    Read more »

Filed under: Economic Crisis, Economic outlook, Emerging Markets, Europe, Financial Crisis, growth, International Monetary Fund, Latin America | Tagged: , , , , , , , , , , , , , , , | 4 Comments »

2011 In Review: Four Hard Truths

Posted on December 21, 2011 by iMFdirect

By Olivier Blanchard

(Versions in  عربي, 中文, Español, Français, Русский, 日本語)

What a difference a year makes …

We started 2011 in recovery mode, admittedly weak and unbalanced, but nevertheless there was hope. The issues appeared more tractable: how to deal with excessive housing debt in the United States, how to deal with adjustment in countries at the periphery of the Euro area, how to handle volatile capital inflows to emerging economies, and how to improve financial sector regulation.

It was a long agenda, but one that appeared within reach.

Yet, as the year draws to a close, the recovery in many advanced economies is at a standstill, with some investors even exploring the implications of a potential breakup of the euro zone, and the real possibility that conditions may be worse than we saw in 2008.

I draw four main lessons from what has happened.

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Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Financial Crisis, Fiscal policy, Fiscal Stimulus, G-20, growth, International Monetary Fund, Multilateral Cooperation, Public debt, recession | Tagged: , , , , , , , , , , , , , , , | 53 Comments »

Showcasing a More Confident Africa

Posted on December 16, 2011 by iMFdirect

Christine Lagarde

Africa is on the move. While several other regions of the world have to address slowdown and uncertainty, many countries in Africa have been facing a contrasting challenge: to respond to the growing demand for their bountiful resources and manage rising investment in much-needed infrastructure. But at the same time, growing economic uncertainty in the world is raising concerns across the continent where vulnerability to global shocks remains high.

Christine Lagarde is visiting Africa for the first time as Managing Director of the International Monetary Fund this week and she says that she hopes to deepen the Fund’s partnership with Africa.

Read more »

Filed under: Africa, Economic Crisis, Employment, Financial Crisis, growth, IMF, Inequality, International Monetary Fund, Low-income countries | Tagged: , , , , , , , , | 5 Comments »

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