Posted on January 27, 2012 by iMFdirect
Amid the heaviest snowfall in Davos for decades, IMF chief Christine Lagarde has been making her case for urgent action to resolve the eurozone crisis, which is at the center of current global economic concerns. The Fund recently sharply revised downward its forecast for global economic growth and in a speech in Berlin Lagarde mapped a way forward.
Lagarde has taken her messages to the Alpine resort in Switzerland, where global leaders are gathered for the 42nd Annual Meeting of the World Economic Forum. At the top of the agenda is the need to find and implement the policy solutions to avoid a downward economic spiral—or what Lagarde as has called a “1930s moment.” She set out some of the policy priorities in a video interview and stressed the need for policy action to be “coordinated, cooperative and comprehensive”. The main goal is to get growth going again “because that’s most needed. There is too much unemployment around the world,” Lagarde said. (more…)
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Emerging Markets, Employment, Europe, Financial Crisis, Fiscal policy, IMF, International Monetary Fund | Tagged: 1930s, 1930s moment, 42nd Annual Meeting of the World Economic Forum, Christine Lagarde, comprehensive action, Davos, euro, eurozone, unemployment, World Economic Forum, World Economic Outlook | 18 Comments »
Posted on January 7, 2011 by iMFdirect
By Christoph Rosenberg
Two years ago, the eyes of the financial world were not on Europe’s Western periphery but on its North-Eastern corner. The three Baltic states—Estonia, Latvia and Lithuania—were among the first victims of the global financial crisis.
After a spectacular boom, with several years of Chinese-style growth rates, these small and open economies faced an equally spectacular bust. Credit―and with it property prices, consumption, and investment―collapsed. Exports were hit by the global depression. And the financial sector came under severe stress. Indeed, Latvia was forced to nationalize its largest domestic bank and had to ask for a bailout from the European Union and the IMF.
The conventional wisdom at the time was that these three countries would have to give up their long-standing currency pegs against the euro and devalue. After all, this is what countries facing a trade and financial shock most often choose to do.
Filed under: Economic Crisis, Emerging Markets, Employment, Europe, Fiscal Stimulus | Tagged: bailout, Baltics, banks, crisis, currency, Estonia, EU, euro, euro area, Europe, European Union, eurozone, growth, Ilmars Rimsevics, IMF, Ingrida Simonyte, jobs, Jurgen Ligi, Latvia, Lithuania, loan, markets, meltdown, recovery, unemployment | 11 Comments »
Posted on July 8, 2010 by iMFdirect
By Olivier J. Blanchard
The macroeconomic forecasts in the IMF’s latest World Economic Outlook update reflect two opposing forces. Looking back, say over the first half of the year, numbers about economic activity have come in strong, indeed somewhat stronger than we had forecast. These would give reasons to be more optimistic than we were earlier.
Looking forward, however, strong clouds have appeared on the horizon. They present real dangers and serious policy challenges, and give reasons to be less optimistic than we were earlier.
Assessing the balance of these two forces is a difficult exercise. Our forecast for world growth in 2010 is about 4½ %, a bit higher than our April forecast of around 4¼ %. This revision largely reflects the stronger activity during the first half of the year. Our forecast for 2011 is broadly unchanged, at about 4¼ %.
Filed under: Advanced Economies, Africa, Asia, Economic Crisis, Economic research, Emerging Markets, Europe, Financial Crisis, Fiscal Stimulus, Low-income countries, recession | Tagged: capital flows, China, euro, Europe, fiscal consolidation, G-20, Greece, IMF World Economic Outlook, Olivier Blanchard, unemployment, world growth, yuan | 4 Comments »
Posted on February 1, 2010 by iMFdirect
By Marek Belka
The conventional wisdom is that, when the seas get rough, it’s better to be in a big boat. But being in the European Monetary Union (EMU) hasn’t exactly been smooth sailing for all its members. On the contrary, as I argued in my blog posted January 21, the crisis has highlighted that sound policy frameworks are more important than ever.
Let’s look at this experience from the perspective of the European Union’s new member states in the East, who are still outside the EMU but are set to join sooner or later. Should they accelerate or delay their applications? And what are the conditions for success, once they have gained entry?
Fixers and floaters
The answer to the first question depends in large part on the currency regime. For small and very open countries with fixed exchange rates—the three Baltic republics and Bulgaria—there is really no alternative to seeking EMU membership as fast as possible. They have been particularly hard hit by the crisis, partly because of their currency regime; in fact, Latvia had to rely on massive external support to pull through the crisis. But they all have managed to hold on to their long-standing currency pegs against the euro. Once in EMU, their economic policy frameworks would remain virtually unchanged. At the same time, euro adoption would remove residual currency and liquidity risks, which during the recent crisis have driven up borrowing costs, dented investor and consumer confidence, and contributed to their sharp output contractions. So for the peggers, joining the club is all gain and no (additional) pain.
Filed under: Economic Crisis, Europe, Fiscal Stimulus | Tagged: currency pegs, currency regime, euro, European Monetary Union, fixed exchange rates, Flexible Credit Line, labor mobility | 3 Comments »