Posted on August 8, 2013 by iMFdirect
By Murtaza Syed
(Version in 中文)
Anticipation of the U.S. Federal Reserve’s exit from quantitative easing has dominated headlines in recent weeks. Half a world away, less conspicuously, but no less importantly, China, the globe’s second largest economy, is designing its own policy adjustments: firstly, unwinding the fiscal and monetary stimulus that helped shield it from the Great Recession and lifted global growth (but which also created some vulnerabilities), and secondly transitioning out of a growth model that has generated spectacular growth over the last three decades, but which is now running out of fuel.
Managed well, these twin adjustments would allow China to prolong its economic miracle in a sustainable way, with a significant positive impact for the rest of the world.
Filed under: Asia, Economic Crisis, Emerging Markets, Employment, Finance, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: China, credit, interest rate-growth differential, investment, Labor, Murtaza Syed, reform | 5 Comments »
Posted on August 5, 2013 by iMFdirect
By Jerry Schiff
(Versions in 日本語l and 中文)
Discussions in Japan of the “three arrows” of Abenomics—the three major components of Prime Minister Shinzo Abe’s economic plan to reflate the economy—are rampant among its citizens as well as economists, journalists and policy-makers worldwide. Even J-Pop groups are recording paeans to the economic policy named after the newly-elected premier. It is clear that “Abenomics” has been a remarkable branding success. But will it equally be an economic triumph?
We think it can be, and initial signs are positive. But such success is not assured. It will require difficult decisions as the country moves into largely uncharted territory. And much will depend on changing expectations within the country.
Filed under: Advanced Economies, Asia, Economic Crisis, Finance, growth, IMF, International Monetary Fund, Public debt | Tagged: Abenomics, Article IV, Bank of Japan, deflation, fiscal policy, growth, IMF, iMFdirect, International Monetary Fund, investment, Japan, monetary policy, public debt, quantitative easing, stimulus | 1 Comment »
Posted on August 1, 2013 by iMFdirect
By Jarkko Turunen
(Version in Español)
A year ago, we were very concerned about lingering weakness in the U.S. housing market, which we saw as a major obstacle to the economic recovery.
But what a difference a year makes! As our latest report on the U.S. economy points out, the housing market recovery has been stronger than expected, and is providing a significant boost to private domestic demand and economic growth.
What has changed in the last 12 months? House prices have rebounded sharply and are currently about 7-12 percent above their level a year ago. Home sales increased by more than 15 percent over the same time period. Thanks to higher house prices and the positive effects of government housing finance programs, fewer homeowners are “underwater” (owe more on their mortgages than their houses are worth) or are behind on their mortgage payments, and fewer houses are entering foreclosure.
Filed under: Advanced Economies, Economic Crisis, Economic research, Employment, Finance, growth, IMF, International Monetary Fund, Investment, Public debt | Tagged: economic growth, Federal Reserve, house prices, housing, housing indicators, housing market, IMF, iMFdirect, International Monetary Fund, monetary policy, mortgages, U.S., United States | Leave a Comment »
Posted on July 30, 2013 by iMFdirect
By Deniz Igan
(Version in Español)
Much has changed on the fiscal front since we started worrying about U.S. fiscal sustainability. The federal government budget deficit has fallen sharply in recent years―from almost 12 percent of GDP in 2009 to less than 7 percent in 2012. And recent budget reports show that the deficit is shrinking faster than expected only a few months ago, to a projected 4½ percent of GDP for the current fiscal year, which ends September 30. Plus, health care cost growth has slowed down dramatically since the Great Recession, alleviating the pressure on public health care programs at least temporarily.
Does this mean we can stop worrying? Not quite. Recent developments certainly mean that things are better than we thought just a few years ago and the fiscal adjustment needed to restore sustainability is smaller. But if the choice and timing of policy measures is not right, the deficit reduction may turn out to be too much in the short run—stunting the economic recovery—and not enough in the long run.
So, in our recent annual check-up of the U.S. economy, our advice is to slow the pace of fiscal adjustment this year—which would help sustain growth and job creation—but to speed up putting in place a medium-term road map to restore long-run fiscal sustainability.
Filed under: Advanced Economies, Economic Crisis, Economic research, Employment, Finance, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: Article IV, deficits, economic recovery, fiscal sustainability, IMF, iMFdirect, International Monetary Fund, public debt, United States | 3 Comments »
Posted on July 24, 2013 by iMFdirect
By Carlo Cottarelli
Recent political and social unrest in some emerging and developing countries may have idiosyncratic features. But they also have a common denominator: a yearning for more equality in incomes, economic self-determination, and political power. Are these developments in seemingly unrelated emerging economies the beginning of a trend?
Simple—some would say simplistic!—empirical evidence suggests that this may indeed be the case: look at the convergence of real per capita GDP in emerging markets to the level observed in Western Europe and the United States in the early sixties (see chart 1). One can conjecture that, once per capita income achieves this level, the rise of the middle class prompts demands for more equity in the distribution of economic and political power. We know the sixties. It was a time when the rise of the middle class led to a wave of social unrest and change that rocked the economy and society—a change that gradually spread throughout the western world (what we now call “advanced economies”), with a call for more social justice, more democracy, and a better life for everyone. What followed were deep social and economic transformations.
Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: fiscal policy, GDP, interest rates, public spending, taxes | 1 Comment »
Posted on July 17, 2013 by iMFdirect
By Krishna Srinivasan
The UK economy is a long way from a strong and durable recovery. Growth has been flat for more than two years now, per capita income is about 7 percent below its pre-crisis peak, unemployment is elevated at 7.8 percent, with youth unemployment alarmingly high at 21 percent, and credit to the economy remains severely constrained.
Recent data are, however, encouraging, and policies should capitalize on the nascent signs of recovery to secure strong growth and rebalance the economy. Fixing the financial sector, including by addressing banks’ asset quality, is a pre-requisite for a durable UK recovery. See the IMF’s assessment of the UK economy.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, growth, International Monetary Fund | Tagged: banks, credit, fiscal consolidation, monetary policy, unemployment, United Kingdom | 1 Comment »
Posted on July 9, 2013 by iMFdirect
By Olivier Blanchard
Today we released our update of the World Economic Outlook.
The world economy remains in 3-speed mode. Emerging markets are still growing rapidly. The US recovery is steady. And much of Europe continues to struggle.
There is however a twist to the story. Growth almost everywhere is a bit weaker than we forecast in April, and the downward revision is particularly noticeable in emerging markets. After years of strong growth, the BRICS in particular are beginning to run into speed bumps. This means that the focus of policies will increasingly need to turn to boosting potential output growth or, in the case of China, to achieving more sustainable and balanced growth.
What the Numbers Show
Filed under: Advanced Economies, Africa, Asia, Economic Crisis, Economic outlook, Emerging Markets, Europe, Finance, Financial Crisis, growth, IMF, International Monetary Fund, Latin America, Politics, recession | Tagged: China, euro zone, forecast, Japan, Olivier Blanchard, Russia, United States, WEO, World Economic Outlook | 3 Comments »
Posted on June 10, 2013 by iMFdirect
By Antoinette M. Sayeh
Sub-Saharan Africa is the second fastest-growing region of the world today, trailing only developing Asia. This is remarkable compared to the current complicated state of the global economy, with Europe still struggling and the United States slowly on the mend.
In 2012, Sub-Saharan Africa maintained solid growth, with output growth at 5 percent on average. The factors that have supported the region through the Great Recession—strong investment, favorable commodity prices, and generally prudent macroeconomic management—continued to be at play.
Filed under: Africa, Economic Crisis, Economic outlook, Emerging Markets, Employment, Financial Crisis, Français, growth, International Monetary Fund, Low-income countries | Tagged: Democratic Republic of Congo, Ethiopia, Ghana, growth, investment, jobs, Malawi, regional economic outlook, Sub-Saharan Africa, Tanzania, unemployment | 1 Comment »
Posted on May 20, 2013 by iMFdirect
by Gustavo Adler and Nicolás Magud
(Versions in Español and Português)
Commodity exporting countries in Latin America have benefited strongly from the commodity price boom that began around 2002. And the accompanying improvements in public and external balance sheets have fed a sense that this time the macroeconomic response to the terms-of-trade boom has been different (and more prudent) than in past episodes. But, has it?
In our recent work, we analyze the history of Latin America’s terms-of-trade booms during 1970–2012 and quantify the associated income windfall (i.e., the extra income arising from improved terms-of-trade). We also document saving patterns during these episodes and assess the extent of the “effort” to save the income windfall.
Our findings suggest that, although the additional income shock associated to the recent terms-of-trade boom is unprecedented in magnitude, the effort to save it has been lower than in past episodes.
Filed under: Economic Crisis, Emerging Markets, Fiscal policy, growth, IMF, International Monetary Fund, Latin America | Tagged: Bolivia, Brazil, Chile, commodity exporters, commodity exports, IMF, iMFdirect, International Monetary Fund, investment, Latin America, Mexico, savings, trade, Venezuela | 1 Comment »