It’s Hip to Be Square—Why Good Financial Sector Supervision Is Important


By José Viñals 

Financial supervisors often get a raw deal. They are the stodgy “buttoned-up” guys who stand in the way of innovation, the dyed-in-the-wool bureaucrats who resist change and meddle with markets. On the list of thankless jobs they rank somewhere between traffic wardens and tax administrators.

And yet, as the global financial crisis taught us, supervision is incredibly important. Countries with the same set of rules had very different experiences during the crisis. Why? There are clearly many reasons but one of them is “better supervision.” After all, rules are only as good as their implementation. In some countries, the financial supervisor became the unsung hero of the crisis. One might say “It’s hip to be square!”  

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Downturn After Boom: Slow Credit Growth in Middle East, North Africa


By Masood Ahmed

In the midst of an early and uncertain economic recovery from the global crisis, countries in the Middle East and North Africa (MENA) region have been experiencing a sharp slowdown in the growth of credit to the private sector, by about 30 percentage points on average relative to precrisis peak rates.

For many sectors, firms, and households that depend on bank financing, this slowdown may be forcing them to scale back their spending plans, or to resort to scarce or costly alternative avenues for financing. Slow credit growth may therefore be constraining the strength of the recovery in the short run, in addition to limiting prospects for longer-term growth. Policymakers are understandably concerned.

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Asia: The Challenge of Capital Inflows


By Anoop Singh

As I have highlighted in previous posts, Asia has been leading the global recovery and it is expected to continue doing so in the near term.

Not only has Asia’s rapid growth helped output return to pre-crisis levels relatively quickly, it has attracted large capital inflows into the region. Foreign capital has poured in, attracted by Asia’s strong fundamentals and bright growth prospects. Portfolio and cross border banking flows have rebounded sharply as financial conditions normalized.

Looking ahead, our growth projections suggest that Asia is expected to outperform advanced countries. As a result, the region is likely to continue to attract significant capital inflows, assuming that fallout from the euro zone sovereign debt crisis is contained and that the recent spike in global risk aversion abates.

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Asia: Exiting from Stimulus in an Uncertain World


By Anoop Singh

(Version in 中文 日本語 and 한국어)

I blogged last from China, and this week I am in India to present our latest Asia-Pacific Regional Economic Outlook in New Delhi. India is of course, along with China and some other countries, an important driver of the Asian recovery. And Asia in turn is leading the global recovery.

At the same time, the global recovery also influences Asia’s growth, given Asia’s high dependence on export demand and its growing integration with international financial markets. And the global outlook is subject to downside risks, which came to the forefront again last week in the form of developments in Europe and continue to be reflected in financial market volatility all across the world.

So, while recent Asian performance has been strong and the outlook remains relatively positive, we are not yet out of the woods.

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Does Cheap Foreign Money Bring Risks for Latin America?


By Nicolás Eyzaguirre

Versión en Español

Not so long after the global financial crisis, the supply of foreign financing has become abundant, and cheap, for many emerging market countries.  This sounds like good news for Latin America, and it is—creating opportunities for debt management, saving on interest paid to foreigners, and expanding opportunities for investment.  But it also comes with a number of potential risks that need to be managed.

Our new Regional Economic Outlook for the Western Hemisphere takes an in-depth look at the risks arising from what we call “easy external financial conditions.”  There we analyze how the more financially integrated economies of Latin America have responded to such conditions in the past, with comparison to countries of other regions. Our comparisons focus especially on a group of advanced economies—Canada, Australia and New Zealand, and Norway—that also are commodity exporters, as well as being inflation targeters with highly flexible exchange rates.

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Key Links for the Greek Financing Package


Greece announced May 2 it had reached agreement with the International Monetary Fund (IMF), the European Commission, and the European Central Bank (ECB) on a targeted program to stabilize its economy, become more competitive, and restore market confidence with the support of a €110 billion (about $145 billion) financing package.

Negotiators over the weekend wrapped up details of the package, involving budget cuts, a freeze in wages and pensions for three years, and tax increases to address Greece’s fiscal and debt problems, along with deep reforms designed to strengthen Greece’s competitiveness and revive stalled economic growth.

Here’s links to key documents and material about Greece:

Greek Prime Minister announces agreement with the EU and the IMF
IMF Survey magazine article on the weekend deal
IMF approves loan
The IMF and Greece: fast facts
IMF and Greece: country page
IMF Managing Director on the program
Eurogroup ministers’ statement
Straus-Kahn and Merkel: pre-deal talks
Video: IMF mission chief explains the program
Institute of International Finance reaction
Video: Trichet sees program as decisive
Video: IMF mission chief on CNBC
ECB action
IMF welcomes euro stabilization plan
Straus-Kahn interviewed by Euronews
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