Africa and the Great Recession: Changing Times

Posted on May 14, 2012 by iMFdirect

By Antoinette Sayeh

(Version in Français)

In previous global downturns, sub-Saharan Africa has usually been badly affected—but not this time around.

The world economy has experienced much dislocation since the onset of the global financial crisis in 2008. Output levels in many advanced economies still remain below pre-crisis levels, while unemployment levels have surged; growth in emerging market economies has slowed, but remains quite high.

But in sub-Saharan Africa, growth for the region as a whole has remained reasonably strong (around 5 percent), except for 2009 – where the decline in world output and associated shrinking of world trade pushed Africa’s growth down to below 3 percent.

Some better than others

Of course, sub-Saharan Africa is a diverse region, and not all economies have fared equally well. The more advanced economies in the region (notably South Africa) have close links to export markets in the advanced economies, and have experienced a sharper slowdown, and weaker recovery, than did the bulk of the region’s low-income economies.  Countries affected by civil strife (such as Cote d’Ivoire, and now Mali) and by drought have also fared less well than other economies in the region.

So why has most of sub-Saharan Africa continued to record solid growth against the backdrop of such a weak global economy?  And can we expect this solid growth performance to continue in the next few years?

(more…)

Filed under: Advanced Economies, Africa, Asia, Debt Relief, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, growth, Inequality, International Monetary Fund, LICs, Low-income countries, Politics, Public debt, recession | Tagged: , , , , , , , , , , , , , , , , , | 6 Comments »

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

Posted on April 22, 2012 by iMFdirect

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:

Filed under: Advanced Economies, Africa, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Finance, Financial Crisis, Globalization, growth, IMF, Inequality, International Monetary Fund, Latin America, LICs, Low-income countries, Middle East, Public debt | Tagged: , , , , , , , , | 4 Comments »

Mediocre Growth, High Risks, and The Long Road Ahead

Posted on April 17, 2012 by iMFdirect

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.

(more…)

Filed under: Advanced Economies, Africa, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Finance, Financial Crisis, Fiscal policy, Fiscal Stimulus, Globalization, growth, Inequality, International Monetary Fund, Latin America, LICs, Low-income countries, Middle East, Public debt, recession | Tagged: , , , , , , , , , , , , , , , | 7 Comments »

Latin America: Making the Good Times Last

Posted on March 22, 2012 by iMFdirect

By Nicolás Eyzaguirre

(Version in Español)

Last week I attended the Annual Meeting of the Inter-American Development Bank in Montevideo, Uruguay where I gave a preview for growth in the region.

If I had to summarize the global backdrop for Latin America in four words, I would say “favorable, but still risky.” The global setting is favorable for two reasons:

  • First, some of the recent data has come in a bit stronger than expected, particularly figures on U.S. economic activity and employment. In the emerging markets sphere, growth remains fairly solid. Notably, China continues to put in a good performance, even though growth is easing and its exports are down somewhat. Good growth in Asia supports demand for Latin America’s key commodity exports, keeping terms of trade favorable.
  • Second, major countries have taken some important policy steps to underpin global growth and stability. In Europe, the European Central Bank’s Long Term Refinancing Operation has eased liquidity pressures for European banks and sovereigns and headed off a large deleveraging that would have crimped growth. Also, stronger fiscal adjustment programs and progress in resolving Greece’s stresses have supported confidence. In the United States, the Federal Reserve’s lengthening into 2014 of its commitment to maintain ultra-low interest rates, along with the extension of payroll tax relief and unemployment benefits, are bolstering demand and employment.

Overall, conditions and the outlook remain relatively favorable for the region. Commodity prices continue to ride high, despite some recent setbacks, thanks to buoyant emerging-market demand. Accommodative monetary policies in the major countries, and ample liquidity, maintain easy financing conditions for the more creditworthy countries. Indeed, the reemergence of strong capital inflows is again putting unwelcome upward pressure on exchange rates in some financially-open countries.

(more…)

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Finance, Financial Crisis, Fiscal policy, Fiscal Stimulus, G-20, Globalization, growth, IMF, Latin America, Public debt | Tagged: , , , , , , , , , , , , , | 7 Comments »

Driving the Global Economy with the Brakes On

Posted on January 24, 2012 by iMFdirect

By Olivier Blanchard

(Versions in  عربي, 中文, Español, Français, Русский, 日本語)

After the speech by the IMF’s Managing Director in Berlin yesterday, my main messages on the global outlook will not surprise you.

Starting with the bad news–the world recovery, which was weak in the first place, is in danger of stalling. The epicenter of the danger is Europe, but the rest of the world is increasingly affected.

There is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession.

Turning to the good news–with the right set of measures, the worst can definitely be avoided, and the recovery can be put back on track. These measures can be taken, need to be taken, and need to be taken urgently.

And now the numbers, starting at the epicenter:

The IMF’s forecast for growth in Euro Area for 2012 is ‑0.5 percent—this marks a decrease of 1.6 percentage points relative to our September 2011 projection. In particular, we predict negative growth in Italy (‑2.2 percent) and Spain (‑1.7 percent).

We have also revised downwards our forecasts for other advanced countries, although by less. Only for the United States, is our forecast unchanged at 1.8 percent.

(more…)

Filed under: Advanced Economies, Africa, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, Fiscal Stimulus, G-20, Global Governance, growth, IMF, Inequality, International Monetary Fund, Latin America, Low-income countries, Middle East, Public debt, recession | Tagged: , , , , , , , , , , , , , , | 8 Comments »

Lurking in the Shadows—The Risks from Nonbank Intermediation in China

Posted on November 3, 2011 by iMFdirect

By Nigel Chalk

(Version in 中文)

One of my all-time favorite movies is “The Third Man” starring Orson Welles and Joseph Cotten. It is a British film noir from the 1940s. Perhaps the most striking part of the movie is the shadowy cinematography, set in post-World War II Vienna. Strangely, it springs to mind lately when I have been thinking of China.

Many China-watchers looked on in awe in 2009 as the government’s response to the global financial crisis unfolded, causing bank lending as a share of the economy to expand by close to 20 percentage points in less than a year. This, subsequently, led to a lot of hand-wringing about the consequences of those actions and the eventual credit quality problems that China would have to confront and manage.

However, around the same time, a less visible phenomenon was also getting underway. One that, like Orson Welles’ character in the movie, resided firmly in the shadows. Various types of nonbank financial intermediaries—some new, some old—were gearing up to provide a conduit through which China’s high savings would be tapped to finance the corporate sector. The available data on this is terrible—the central bank’s numbers on social financing are the only credible and comprehensive public source, but even that gives only a partial picture.

Talking to people in China, and looking at what numbers are available, one cannot help but have an uneasy feeling that more credit is now finding its way into the economy outside of the banking system than is actually flowing through the banks. (more…)

Filed under: Asia, Financial regulation, Financial sector supervision, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , | 24 Comments »

Africa’s New Janus-Like Trade Posture

Posted on October 30, 2011 by iMFdirect

By Antoinette M. Sayeh

It wasn’t all that long ago when virtually all of sub-Saharan Africa’s exports were destined for Europe and North America.

But the winds of Africa’s trade have shifted over the past decade. There has been a massive reorientation towards other developing countries, in particular China and India.

Like Janus, the Roman god, Africa’s trade is now, as it were, facing both east and west.

Our latest Regional Economic Outlook for sub-Saharan Africa looks closely at these developments and its policy implications.

In addition to the well-known gains from international trade, Africa’s trade reorientation is also beneficial because it has broadened the region’s export base and linked Africa more strongly to rapidly growing parts of the global economy. These changes will help reduce the volatility of exports and improve prospects for robust economic growth in Africa.

(more…)

Filed under: Africa, Asia, Economic outlook, Emerging Markets, International Monetary Fund, Low-income countries | Tagged: , , , , , , , , , , , , , , , | 6 Comments »

Darn Them Piggies! Pork Prices & the Inflation Outlook for China

Posted on September 11, 2011 by iMFdirect

By Nigel Chalk

(Version in 中文)

It was pretty clear to me on a recent visit that China has become one of the biggest global markets for Angry Birds. The game was everywhere and around 100 million Chinese downloads are expected this year. It made me wonder if this was somehow linked to rising concerns over inflation and a way of getting back at those (increasingly expensive) mischievous green pigs.

During the past year, views on China’s economy have yo-yoed from concerns about the recovery, to hand-wringing about inflation and overheating, and then back to talk of hard landing.

Certainly inflation has been a key feature of the environment this year in China and one should pay close attention to it. Rising inflation is a crucial social concern and takes a heavy toll on household incomes that are already struggling to keep up with economic growth. (more…)

Filed under: Asia, Economic outlook, Emerging Markets, IMF, International Monetary Fund, 中文 | Tagged: , , , , , , , , , , , , , , , , | 2 Comments »

Whack-A-Mole in China’s Bubbly Housing Market

Posted on August 9, 2011 by iMFdirect

By Nigel Chalk

(Version in 中文)

 It has gone out of fashion now but, not so long ago, there was a popular fairground attraction called Whack-A-Mole. Rascally moles would pop their cute little heads out of holes in the ground and your task was to use a giant rubber mallet to wallop the poor critters back from where they came. China’s bubbly housing market makes me think that this game could be ready for a comeback.

There’s a lot of talk these days of a bubble in China’s property market. Certainly there’s no shortage of super-sharp investors and analysts that have very strong (and very diverse) views—see what  James Chanos, Andy Rothman, and Nouriel Roubini have to say.

The China team at the IMF is regularly asked about this. The question crops up in many different guises: Is China’s property sector going to crash? What about all those empty apartments that have no one living in them? Have you seen the remarkable and pristine ghost towns in Ordos? Isn’t all this going to end badly? (more…)

Filed under: Asia, Emerging Markets, growth, International Monetary Fund, 日本語 | Tagged: , , , , , , , , , | 18 Comments »

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