Spring Is in the Air in Parts of Latin America


By Nicolás Eyzaguirre

(Version in Español)

Here in Washington D.C., Spring is showing its early signs, so we naturally feel a bit more upbeat. But spring comes in fits and starts—a day of sunshine, followed by cold rain, followed by sunshine again. So, we carry an umbrella on sunny days—but also have sunscreen ready.  It’s much the same for most of Latin America and the Caribbean, as we discuss in our Regional Economic Outlook for the Western Hemisphere. So, on a spring day, how do we see things?

Well, before explaining what I mean, let me start with a broad overview.

Most of Latin America stands out from much of the rest of the world—not for great economic performance, but for good performance in a subpar environment. Growth is generally solid, despite a slowdown late last year owing to policy tightening and global volatility. Under our baseline scenario, we expect regional growth to moderate to near 3¾ percent in 2012, down from 4½ percent last year (but modestly up from our January projections).

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Top Links from the IMF – Global and Regional Economic Analysis for April


The IMF and World Bank have just wrapped up their Spring Meetings for April, dominated by agreement on a huge boost to the anti-crisis firewall to prevent contagion in the event of another flare-up.

Here’s some of the highlights in our latest global and regional assessments:

Mediocre Growth, High Risks, and The Long Road Ahead


By Olivier Blanchard

(Versions in Español, عربي)

For the past six months, the world economy has been on what is best described as a roller coaster.

Last autumn, a simmering European crisis became acute, threatening another Lehman-size event, and the end of the recovery.  Strong policy measures were taken, new governments came to power in Italy and Spain, the European Union adopted a tough fiscal pact, and the European central bank injected badly needed liquidity.   Things have quieted down since, but an uneasy calm remains.  At any moment, it seems, things could get bad again.

This shapes our forecasts.  Our baseline forecast, released by the IMF on April 17,  is for low growth in advanced countries, especially in Europe.  But downside risks are very much present.

Brakes hampering growth

This baseline is constructed on the assumption that another European flare-up will be avoided, but that uncertainty will linger on.   It recognizes that, even in this case, there are still strong brakes to growth in advanced countries:  Fiscal consolidation is needed and is proceeding, but is weighing on growth.  Bank deleveraging is also needed, but is leading, especially in Europe, to tight credit.  In many countries, in particular in the United States, some households are burdened with high debt, leading to lower consumption. Foreclosures are weighing on housing prices, and on housing investment.

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Youth Speaking Out


CliftJBy Jeremy Clift

Young people, hardest hit by the global economic downturn, are speaking out and demanding change. Coming of age in the Great Recession, the world’s youth face an uncertain future, with lengthening job lines, diminished opportunities, and bleaker prospects that are taking a heavy emotional toll.

Some people call them the iPod generation—insecure, pressured, overtaxed, and debt-ridden—but insecure or not, around the world young people are challenging a system that appears to have let many down. “Young people want a world economy that is more just, more equal, and more human,” says Angel Gurría, secretary-general of the Organization for Economic Cooperation and Development.

Differing impact on generations

Youth Demanding Change

The Great Recession has taken its toll on the different generations in different ways. For the post–World War II baby boom generation, it’s essentially a wealth crisis. A generation that had hoped to retire has seen the value of its property and savings dramatically eroded. For the group known as Gen X (born 1965–80), it’s an income crisis. They should be in the period of their life when they are earning the most, but the downturn has depressed their salaries and threatens their pensions. For Gen Y (1981–2000), it’s about their future and the potentially damaging legacy of the boomer generation.

In recent issues of the magazine, we have looked at the impact of aging populations on economies around the world and how inequality affects growth.

In the March 2012 issue of F&D, we look at the need to urgently address the challenges facing youth and create opportunities for them. Watch a video on this.

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Africa’s Growth Puzzle: Better Ways to Fill Infrastructure Gaps


The issue of reviving or maintaining economic growth is a the forefront of policymakers’ minds all around the world. Of course, the policies needed to achieve that differ from region-to-region, country-to-country.

For many countries in Africa, weak infrastructure is an obstacle to raising growth.

In a recent interview with IMF Survey online magazine, Andrew Berg of the IMF’s Research Department (and one of our contributing bloggers) discusses the challenge of overcoming what he calls a “tremendous infrastructure deficit”, an issue that “affects all levels of society and all aspects. It affects health, education and growth.”

The issue is complicated further by the many competing demands these countries face. “We are talking about the need for infrastructure development, but we could be talking about how incredibly important it is to spend on AIDS, health, education, or any number of things,” says Berg.

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Making the Most of Bad Situations


By Hugh Bredenkamp

Governments in low-income countries are having to deal with a lot of bad news these days. Slow growth in the advanced economies is dampening demand for their exports and affecting inflows of investment, aid, and remittances. Changes in credit conditions elsewhere influence the availability of trade finance. Volatility in commodity prices creates problems for both importers and exporters. Meanwhile, climactic and other natural disasters continue to occur at the local and regional level.

For low-income countries, the impact of these problems can be especially damaging. A surge in food prices can undo years of poverty reduction. A collapse in the price of a key export commodity can throw many people out of work and cause tax revenues to slip, just when expenditures on public services are needed most. For the poorest countries, events elsewhere can quickly affect employment, inflation, the budget, debt, and the balance of payments.

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Heartbreak and Hardship—Finding a Way Out for Fragile States


By Dominique Desruelle

War-torn Iraq, quake-ravaged Haiti, conflict-devastated Sierra Leone. So many countries around the world face the legacy of terrible hardships that have left them scarred and fragile.

Everyone agrees that countries need help to recover from these situations. But it is not easy to come to a shared understanding on what this really takes.

Some have questioned whether the IMF has a meaningful role to play. They argue that engagement in fragile states—countries with weak institutions and infrastructure, internal conflict, and governments that face difficulties delivering core services to the population—should mainly be left to bilateral donors and development institutions.

And they couldn’t be more wrong. Helping a country’s economy to work better—the IMF’s core expertise—is a central building block to move beyond fragile situations and achieve better lives for its citizens. Continue reading

iMFdirect—Our Top 10 Posts


As iMFdirect looks back at two years since our blog on global economics was launched in August 2009, we’ve compiled a list of  the posts that have drawn the most attention.

Collectively, the posts give a snapshot of some of the biggest challenges in the world economy—which because of this summer’s developments remain, in some ways, much the same today as two years ago. It’s worth noting that John Lipsky’s outlook for 2011 listed as the No. 1 downside risk to the global economy: “Renewed turbulence in sovereign debt markets could spill over to the real economy and across regions.”

From the start our aim has been to stimulate debate about global economic issues and to open up discussion, through the blog, to a broader audience. During the past two years we’ve had more than 200 posts from leading economists, including several Nobel Prize winners. Many have been reproduced by other blogs around the world and hundreds of people have provided comment and feedback, and participated in constructive debate.

Here are the iMFdirect posts that have drawn the highest number of views:

1. Ten Commandments for Fiscal Adjustment in Advanced Economies

2. Rewriting the Macroeconomists’ Playbook in the Wake of the Crisis

3. Fair and Substantial—Taxing the Financial Sector

4. 2010 Outlook: New Year, New Decade, New Challenges

5. The Future of Macroeconomic Policy: Nine Tentative Conclusions

6. Nanjing and the New International Monetary System

7. Global Safety Nets: Crisis Prevention in an Age of Uncertainty

8. 2011—A Pivotal Year for Global Cooperation

9. Warning! Inequality May Be Hazardous to Your Growth

10. Thinking Beyond the Crisis: Themes from the IMF’s 10th Annual Research Conference

Let us know what you think and subjects you would like to discuss. What would you like to see more of and what less of? We welcome your views and comments.

Beyond Growth: the Importance of Inclusion


By Antoinette Sayeh

(Version in  Français)

Economists care about growth.  Governments care about what it can achieve:  more jobs and more income for more people.  An increasing number of African countries have been growing robustly for more than a decade. But while growth is a necessary condition for poverty reduction and employment creation, is it also sufficient?

When growth first takes off, it is typically associated with steady progress in several dimensions of poverty reduction: incomes rise and countries are able to finance more spending on health and education, which translates into much-needed progress toward the Millennium Development Goals. But after this initial spurt, other questions arise. In particular, a number of countries are increasingly concerned about how inclusive growth is; are the benefits well-spread or do they accrue only to the few? Continue reading

More Diversity will Help the IMF at Work


By iMFdirect

Nemat Shafik, who took over as IMF Deputy Managing Director in April, says she has been surprised by the vigor of internal policy debate at the IMF. “From the outside looking in, you have the impression that the IMF is a monolith with a very single-minded view of the world. When you are inside the Fund, what is really striking is how active the internal debate is,” she says.

At a time when the global economy is being buffeted by continued uncertainty in Europe, uprisings in the Middle East, and signs of overheating in some emerging market economies, there’s a lot to discuss. And, in addition to global economic problems, the IMF’s work environment has come under increased scrutiny, in particular how women are treated and its professional code of conduct.

In an interview, Ms. Shafik discusses some of these issues Continue reading

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