Blanchard Sees Continued Two-Speed Recovery in 2011


Interesting interview with the IMF’s Chief Economist Olivier Blanchard in the Fund’s IMF Survey magazine. He says the two-speed global economic recovery is likely to dominate 2011, with weak growth in advanced economies barely enough to bring down unemployment and emerging markets facing the challenges of success, including how to avoid overheating and handle strong capital inflows.

In an assessment of the global economy at the end of 2010, and the prospects for 2011, Blanchard said that countries should continue to focus on rebalancing their economies in the coming year, including structural measures and exchange rate adjustments.

“Without this economic rebalancing, there will be no healthy recovery,” he says. Read the full interview here.

2010: The Year of IMF Reform


By James Boughton, IMF Historian

(Version in Español)

The year 2010 was—finally—the year of IMF reform. Dominique Strauss-Kahn, the IMF’s Managing Director, did not exaggerate when he asserted that the agreements of 2010 were “the most important reform in the governance of the institution since its creation.” What will happen now, and why is it so important?

Three major changes have been agreed to. Each one is a major reform and the culmination of years of work. Each one will be difficult to make effective. Each one should prove to be a blessing, but only if it is well implemented. Continue reading

Getting the Diagnosis Right: Avoiding a Housing Price Bubble in Hong Kong SAR


By Nigel Chalk

(Version in 中文)

In the past couple of years, Hong Kong has witnessed a sharp increase in property prices. This has led some to claim that the time has come to change Hong Kong’s “Linked Exchange Rate System”.

This represents a misdiagnosis of the current situation and the wrong prescription for Hong Kong.

It is true that the average cost of an apartment in Hong Kong has risen by almost 20 percent in the past year alone. This stands in stark contrast to what our latest World Economic Outlook described as the dismal outlook for real estate markets in the industrial countries.

And, like many countries in the region, Hong Kong has been the destination for an extraordinary amount of global capital over the past two years.

But how much of these trends have been a product of the exchange rate regime? Continue reading

Today’s Bounty, Tomorrow’s Promise: Better Policies to Manage Natural Resources


By Leslie Lipschitz

(Version in Español | Français | عربي )

Countries rich in natural resources are often looked at with envy: they face few financial constraints and that should speed their development path. But the reality is less rosy.
Countries with an abundance of natural resources—typically oil, gas or minerals—have, on average, performed less well than comparable non-resource rich countries.

That raises one of the perennial questions in economic policymaking. How to manage the economic and social challenges that stem from resource wealth? Or, to borrow the words of Professor Thorvaldur Gylfason (University of Iceland), how to prevent “nature’s bounty” from “becoming the curse of the common people”? Continue reading

Quo Vadis México?


By Nicolás Eyzaguirre

(Version in Español)

Ahead of my arrival today in Mexico with the IMFs Managing Director Dominique Strauss-Kahn, I can’t help but reflect on how things have changed for the better in Mexico over the past decade in the sphere of economic policy. At the same time, I am struck by the importance of the task ahead for Mexico: grasping the opportunities offered by the changing global scene.

Strong frameworks

Debt and inflation before the crisisMexico’s economic institutions have been very substantially strengthened. The balanced budget fiscal rule has supported fiscal discipline and a reduction in public debt. Moreover the structure of this debt has been radically improved—Mexico has created a deep domestic bond market and extended maturities. The introduction of inflation targeting has cemented the credibility of Banxico and fostered a reduction in inflation—that most unequal of taxes on the poorest—to low single digit levels. Meanwhile, the deep commitment to the flexible exchange regime has created an important safety valve for the economy. Continue reading

IMF Launches Spanish-language Blog for Latin America


The International Monetary Fund today launched its Spanish-language blog for Latin America,  Diálogo a Fondo.

The blog will focus on international issues and economic topics related to Latina America.  The first post is by Nicolás Eyzaguirre, head of the IMF’s Western Hemisphere Department, on the outlook for Mexico. He writes that Mexico’s strong economic institutions helped the country get through the global economic crisis and its economy is now recovering well.

The new Spanish-language blog complements the IMF’s English-language blog, iMFdirect—the Fund’s global economy forum.

Is There a Silver Lining to Sluggish Credit Growth in the Gulf Countries?


By Masood Ahmed

(Version in عربي )

Bank credit has been very slow to pickup in the six nations of the Gulf Cooperation Council (GCC). How big a problem is this for their economic recovery?

Sluggish credit growth in the post-crisis period was hardly a unique development, as indicated in our latest Regional Economic Outlook. More than a dozen countries in the Middle East and Central Asia region, and countless more outside the region, shared this experience. But while there are clearer signs of recovery in some countries, credit to the private sector is still barely growing in the GCC, notwithstanding policy efforts to revive it.

It might seem easy to ring the alarm bells. After all, won’t the prospect of weak credit growth restrain economic activity in the short-term? Perhaps. But we believe the negative impact of credit growth may not be quite so severe.

Why not? In part, that answer lies in how we arrived at the current situation. Continue reading

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