Posted on January 22, 2014 by iMFdirect
By Min Zhu
(Version in Français, Русский, 日本語, Português, عربي and 中文)
We had a big debate on emerging markets’ growth prospects at our Annual Meetings in October 2013. We lowered our 2013 growth forecast for emerging markets and developing economies by a whopping 0.5 percentage points compared to our earlier forecast. Some argued that we were too pessimistic. Others said that we should have stuck with the lower-growth scenario we had devised at the onset of the global financial crisis.
Fast forward to today. Indeed, most recent figures indicate that the engines of global growth—emerging markets and developing economies—have slowed significantly. Their growth rate dropped about 3 percentage points in 2013 from 2010 levels, with more than two thirds of countries seeing a decline— Brazil, China, and India lead the pack. This is important for the global economy, since these economies generate half of today’s global economic activity.
In my more recent travels around the world—five regions on three continents—I received the same questions everywhere: what is happening with the emerging markets? Is the slowdown permanent? Can emerging markets boost their growth? What are the downside risks?
Filed under: Annual Meetings, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, Fiscal Stimulus, growth, IMF, International Monetary Fund, Latin America | Tagged: Brazil, central banks, China, commodiity prices, India, Indonesia, interest rates, international trade, Turkey | 1 Comment »
Posted on January 16, 2014 by iMFdirect
By Alejandro Werner
(Version in Español and Português)
Some basic realities seem to be getting lost in the debate over the Fed’s “exit” from unconventional monetary policy and its impact on Latin America.
First, the still-loose stance makes sense. U.S. inflation is too low, the output gap too large, and the labor market too weak. And even during tapering, the Fed’s stance will remain highly loose. The 10-year Treasury rate, adjusted for core inflation, is about 230 basis points below its 30-year average and the inflation-adjusted Fed funds rate is 320 basis points below. These rates are likely to remain below their 30-year average for at least the next two to three years.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Emerging Markets, Español, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Latin America, Low-income countries | Tagged: capital flows, financial stability, inflation, Latin America, monetary policy, U.S., U.S. Fed | Leave a comment »
Posted on January 13, 2014 by iMFdirect
By Alexander Culiuc and Kalpana Kochhar
(Versions in Español, Русский, Português, and 中文)
A number of emerging market economies have been on a rollercoaster since the U.S. Federal Reserve announced last May the eventual tapering of its asset purchase program. This is another reminder of how susceptible these economies remain to economic conditions outside their borders.
Much of the market movements to date have been short term in nature. But emerging markets know the end-game – interest rates in advanced economies will eventually go up, reducing the cheap external financing they have benefited from until now. And this is not the only external factor weighing on the growth prospects of emerging markets.
Filed under: Advanced Economies, Economic Crisis, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: advanced economies, capital flows, commodiity prices, emerging market economies, exchange rate, inflation, interest rates, World Economic Outlook | 3 Comments »
Posted on December 15, 2013 by iMFdirect
By Olivier Blanchard, Jonathan D. Ostry, and Atish R. Ghosh
International policy coordination is like the Loch Ness monster: much discussed but rarely seen. Going back over the decades, and even further in history to the period between the Great Wars, coordination efforts have been episodic.
Coordination seems to occur spontaneously in turbulent periods, when the world faces the prospect of some calamitous outcome and the key players are seeking to avoid cascading negative spillovers. In quieter times, coordination is rarer—though not unheard of; the Louvre and Plaza accords are examples.
Today, policy coordination has resurfaced as a hot topic: while the worst of the global financial crisis is behind us, no one would claim that a return to “Great Moderation” is in the cards, and policymakers around the globe appear worried about policy transmissions across many dimensions.
Filed under: Employment, Finance, Financial Crisis, Fiscal policy, Globalization, growth, IMF, International Monetary Fund | Tagged: exchange rate, interconnected, monetary policy, policy coordination, spillover | 1 Comment »
Posted on December 11, 2013 by iMFdirect
By Alejandro Werner
(Versions Español and Português)
Public finances in most Latin American countries strengthened significantly before the global financial crisis. Since 2009, countries have generally increased public deficits, drawing down on their fiscal coffers.
These expansionary policies continue and are yet to be reversed. With further pressures likely to build over the period ahead—as economic growth has slowed, commodity prices have softened, and external funding costs are bound to rise—now is the right time to rethink fiscal policies across the region.
Filed under: Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Latin America, Public debt | Tagged: Brazil, Chile, Colombia, fiscal policy, Fiscal Stimulus, infrastructure, labor market, Mexico, Peru, public deficits, public finances, public spending | Leave a comment »
Posted on December 2, 2013 by iMFdirect
By Steven Barnett
(Version in 中文)
It’s the season for shopping. We have Cyber Monday in the United States and Singles Day in China (November 11 or 11/11). So, while we are pondering shopping, try to guess which consumer market is growing the fastest. The answer is…China!
China had the largest consumption increase in the world. This was true in 2011, true in 2012, and likely to be true again this year (see chart). Consumption in China is also generally thought to be weak. Indeed, the government and the IMF are calling for more consumer-based growth. How could consumption, in effect, be both weak and strong at the same time?
Filed under: Asia, Economic Crisis, Economic research, Emerging Markets, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: China, consumer spending, consumption | 1 Comment »
Posted on November 27, 2013 by iMFdirect
By Martin Kaufman and Mercedes García-Escribano
(Version in Español and Português)
Since the early 2000s, Brazil’s economy has grown at a robust clip, with growth in 2010 reaching 7.5 percent—its strongest in a quarter of a century. A key pillar of its hard-won economic success has been sound economic policies and the adoption of far-reaching social programs, which resulted in a substantial decline in poverty.
In the last couple of years Brazil’s growth slowed down. Although other emerging market economies experienced a similar slowdown, the growth outturns in Brazil were particularly disappointing. And the measures taken to stimulate the economy did not produce a sustained recovery. This is because unleashing sustained growth in Brazil requires measures geared not at stimulating domestic demand but at changing the composition of demand towards investment and at increasing productivity.
Filed under: Advanced Economies, Economic outlook, Economic research, Emerging Markets, Español, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Latin America, Português, Public debt | Tagged: Article IV, Brazil, BRICs, fiscal consolidation, infrastructure, macroeconomic policy, recovery, unemployment | Leave a comment »
Posted on November 19, 2013 by iMFdirect
By Olivier Blanchard
(Version in Español)
Two weeks ago, the IMF organized a major research conference, in honor of Stanley Fischer, on lessons from the crisis. Here is my take. I shall focus on what I see as the lessons for monetary policy, but before I do this, let me mention two other important conclusions.
One, having your macro house in order pays off when there is an (external) crisis. In contrast to previous episodes, wise fiscal policy before this crisis gave emerging market countries the room to pursue countercyclical fiscal policies during the crisis, and this made a substantial difference.
Second, after a financial crisis, it is essential to rapidly clean up and recapitalize the banks. This did not happen in Japan in the 1990s, and was costly. But it did happen in the US in this crisis, and it helped the recovery.
Now let me now turn to monetary policy, and touch on three issues: the implications of the liquidity trap, the provision of liquidity, and the management of capital flows.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, IMF, International Monetary Fund, Multilateral Cooperation | Tagged: capital flows, exchange rate, financial crisis, fiscal policy, IMF Annual Research Conference, IMF Jacques Polak Research Conference, inflation, monetary policy, Olivier Blanchard, Paul Krugman, stanley Fischer | 2 Comments »
Posted on November 12, 2013 by iMFdirect
By Christine Lagarde
(Versions in عربي)
Two days ago, I had the pleasure of visiting Kuwait, a member country of the Gulf Cooperation Council (GCC). It was a whirlwind visit, with many places to see and people to meet, in a thriving corner of the global economy. Kuwait has extended to me its emblematic tradition of hospitality— a testament to its ancient and noble culture. I was awed by the magnificent artifacts of the al-Sabah collection, which I saw in the beautifully restored Dar al-Athar al-Islamiyyah cultural center.
Back to economics. The member countries of the council—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—have some of world’s highest living standards. The region has also become a major destination for foreign workers and a source of remittances for their families back home. And it is a financial center and a hub for international trade and business services.
Filed under: Economic outlook, Emerging Markets, Employment, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Middle East, عربي | Tagged: Bahrain, Christine Lagarde, economic growth, education, GCC, Kuwait, MENA, Middle East, Oman, Qatar, Saudi Arabia, United Arab Emirates | 4 Comments »
Posted on November 6, 2013 by iMFdirect
By Michael Keen
(Version in Español, Français and 中文)
Last night, when you went to bed, you left $40 on the kitchen table. When you woke up this morning, you found only $30—and a note from the government saying, “Thank you very much, we took $10 as a tax payment.” This is, of course, extremely irritating. To an economist, however, it’s close to an ideal form of taxation, since there is nothing you can now do to reduce, avoid, or evade it—the holy grail of what economists call a non-distorting tax.
(This doesn’t mean that you won’t react in some way. Being worse off, you may now work a bit more, or save a bit less. But any other tax raising $1 would make you even worse off, because it would change relative prices (a tax on your earnings would make working less attractive, for instance), and so take your choices even further from those you would make in the absence of taxation.)
Filed under: Economic Crisis, Economic outlook, Economic research, Finance, Financial sector supervision, Fiscal policy, IMF, International Monetary Fund, Politics, Public debt | Tagged: capital levy, debt, Fiscal Monitor, tax cuts, tax policy, taxation | Leave a comment »