Posted on April 17, 2015 by iMFdirect
By Alejandro Werner
(Version in Español and Português)
Economic activity in Latin America and the Caribbean has been cooling down for several years, and the temperature in many places is still falling. Regional growth is now expected to dip below 1 percent in 2015—down from 1.3 percent in 2014. Apart from a short-lived recession during the global financial crisis, this would be the slowest rate of growth since 2002.
However, growth dynamics vary across the region, broadly along North-South lines. While spring may be in the air for Mexico, Central America, and parts of the Caribbean, the economic climate remains decidedly chilly in much of South America. What is behind these divergent prospects, and how can a sunnier outlook be restored to the entire region?
Filed under: Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Latin America, Reform | Tagged: Bolivia, Brazil, Caribbean, Central America, Chile, Colombia, commodiity prices, Ecuador, exchange rate, Latin America, Mexico, oil prices, Peru, Regional Economic Outlook: Western Hemisphere, South America, spillovers, U.S., Venezuela | Leave a comment »
Posted on April 14, 2015 by iMFdirect
By Olivier Blanchard
(Versions in عربي and Español)
In our April 2015 World Economic Outlook, we forecast global growth to be roughly the same this year than last year, 3.5% versus 3.4%. This global number reflects an increase in growth in advanced economies, 2.4% versus 1.8%, offset by a decrease in growth in emerging market and developing economies, 4.3% versus 4.6% last year. In short, to repeat the words used by the IMF Managing Director last week, we see growth as “moderate and uneven”.
Behind these numbers lies an unusually complex set of forces shaping the world economy. Some, such as the decline in the price of oil and the evolution of exchange rates, are highly visible. Some, from crisis legacies to lower potential growth, play more of a role behind the scene but are important nevertheless. Let me briefly review them.
Filed under: Advanced Economies, Annual Meetings, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Globalization, Government, growth, IMF, International Monetary Fund, Investment, Middle East, Reform | Tagged: Brazil, China, euro area crisis, exchange rate, forecast, Greece, India, infrastructure, investment, Japan, Middle East, oil exporters, oil importers, oil prices, Olivier Blanchard, Russia, Ukraine, United States, WEO, World Economic Outlook | Leave a comment »
Posted on April 8, 2015 by iMFdirect
By Xavier Debrun
(Versions in عربي, 中文, Français, Русский, 日本語and Español)
Anyone can easily picture an economy where instability, stagnation and runaway government deficits converge into a perfect storm. Yet the simple mirror image of stability, growth, and balanced budgets currently seems odd to many. And with monetary policy looking breathless, some even wonder whether sacrificing fiscal sanity for short-term growth might not be worth a try.
In any economic debate, looking at the data is always a good starting point. And the latest issue of the Fiscal Monitor does exactly that. Our study looks at the experience with fiscal stabilization during the past three decades in a broad sample of 85 advanced, emerging market, and developing economies. The message is loud and clear: governments can use fiscal policy to smooth fluctuations in economic activity, and this can lead to higher medium-term growth. This essentially means governments need to save in good times so that they can use the budget to stabilize output in bad times. In advanced economies, making fiscal policies more stabilizing could cut output volatility by about 15 percent, with a growth dividend of about 0.3 percentage point annually.
Filed under: Annual Meetings, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Public debt, Reform | Tagged: debt, emerging market, Fiscal Monitor, fiscal policy, fiscal stabilization, government deficits, investment, recession | Leave a comment »
Posted on April 7, 2015 by iMFdirect
By Aqib Aslam, Daniel Leigh, and Seok Gil Park
(Versions in عربي, 中文, Français, 日本語, Русский, and Español)
The debate continues on why businesses aren’t investing more in machinery, equipment and plants. In advanced economies, business investment—the largest component of private investment—has contracted much more since the global financial crisis than after previous recession. And there are worrying signs that this has eroded long-term economic growth.
Getting the diagnosis right is critical for devising policies to encourage firms to invest more. If low investment is merely a symptom of a weak economic environment, with firms responding to weak sales, then calls for expanding overall economic activity could be justified. If, on the other hand, special impediments are mainly to blame, such as policy uncertainty or financial sector weaknesses, as some suggest, then these must be removed before investment can rise.
Filed under: Advanced Economies, Annual Meetings, Economic Crisis, Economic outlook, Economic research, Financial Crisis, Globalization, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: euro area, fiscal policy, infrastructure, infrastructure investment, investment, monetary policy, sovereign debt, WEO, World Economic Outlook | Leave a comment »
Posted on April 6, 2015 by iMFdirect
By Mohamed Norat, Marco Pinon and Zeine Zeidane
(Versions in عربي)
Since the global financial crisis, policymakers have sought to press the “reset” button to strengthen financial intermediation that is performed by conventional banks and non-bank financial institutions. The aim has been to address the fault lines that helped trigger one of the most devastating financial crises in a century, and to enable a more inclusive, stable financial system that promotes stability as well as economic development and growth.
Islamic finance offers several features that are consistent with these objectives. Islamic finance refers to financial services that conform with Islamic jurisprudence, or Shari’ah, which bans interest, speculation, gambling and short-sales; requires fair treatment; and institutes sanctity of contracts. And these principles hold the promise of supporting financial stability, since a key tenet of Islamic finance is that lenders should share in both the risks and rewards of the projects and loans they finance.
Filed under: Asia, Economic research, Emerging Markets, Financial regulation, Fiscal policy, Globalization, Government, growth, IMF, International Monetary Fund, Investment, Middle East | Tagged: Asia, financial crisis, Hong Kong, Islamic banking, islamic finance, Luxembourg, Middle East, real estate, senegal, Shariah, South Africa, sukuk, tax, United Kingdom | Leave a comment »
Posted on April 2, 2015 by iMFdirect
By Olivier Blanchard
Seven years since the onset of the global financial crisis, we are still assessing how the crisis should change our views about macroeconomic policy. To take stock, the IMF organized two conferences, the first in 2011, the second in 2013, and published the proceedings in two books, titled “In the Wake of the Crisis” and “What Have We Learned?“.
The time seems right for a third assessment. Research has continued, policies have been tried, and the debates have been intense. But have we truly made much progress? Are we closer to a new framework? To address these questions, Raghuram Rajan, Ken Rogoff, Larry Summers and I are organizing a third conference, “Rethinking Macro Policy III: Progress or Confusion?” that will take place on April 15-16 at the IMF.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, Globalization, growth, IMF, International Monetary Fund, Investment, Multilateral Cooperation | Tagged: capital inflows, central banks, exchange rate, financial system, fiscal policy, IMF Annual Research Conference, macroeconomic policy, macroprudential policy, monetary policy, Olivier Blanchard | Leave a comment »
Posted on April 1, 2015 by iMFdirect
By Changyong Rhee
(Versions in 日本語)
Abenomics can succeed, despite recent setbacks to growth and inflation, in revitalizing Japan by making steadfast progress on all three of its arrows equally and simultaneously, as we show in our new book. This is also essential to avoid an undue weakening of the yen and ensure positive spillovers to Japan’s neighbors, its region, and the global economy.
The Legacy: Structural Changes During the Lost Decades
Most Japan followers will be familiar with the following striking statistic: in 2013, Japan’s level of nominal GDP was about 6 percent below its mid 1990s level. During this period, three important structural changes have been a brake on growth and efforts to get out of deflation: Continue reading
Filed under: Advanced Economies, Asia, Economic research, Employment, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: Abenomics, Bank of Japan, deflation, deleveraging, inflation, investment, Japan, labor market, small and medium-sized enterprises, structural changes, structural reform, subsidiaries | Leave a comment »