Posted on October 1, 2015 by iMFdirect
By Selim Elekdag and Gaston Gelos
Debt held by firms in emerging market economies in a currency other than their own poses extra complications these days. When the U.S. Fed does eventually raise interest rates, the accompanying further strengthening of the U.S. dollar will mean an emerging market’s own currency will depreciate against the higher value of the U.S. dollar, and would make it increasingly difficult for firms to service their foreign currency-denominated debts if they have not been properly hedged.
In the latest Global Financial Stability Report, we find that firms in emerging markets that have increased their debt-to-assets ratios have generally also increased their overall sensitivity to changes in the exchange rate—commonly called exchange-rate exposure.
Filed under: Annual Meetings, Economic outlook, Economic research, Emerging Markets, Finance, Fiscal policy, IMF, International Monetary Fund, Investment, Reform | Tagged: Africa, Asia, construction, emerging markets, Europe, exchange rate, foreign exchange, GFSR, Global Financial Stability Report, interest rates, Latin America, Middle East, monetary policy, U.S. Fed | Leave a comment »
Posted on September 24, 2015 by iMFdirect
By Shekhar Aiyar and Anna Ilyina
Problem loans are clogging the arteries of Europe’s banking system. The global financial crisis and subsequent recession have left businesses and households in many countries with debts that they cannot repay. Nonperforming loans as a share of total loans in the EU have more than doubled since 2009, reaching €1 trillion—over 9 percent of the region’s GDP—by end-2014. These loans are particularly high in the southern part of the euro area, as well as in several Eastern and Southeastern European countries. Only a handful of countries have managed to lower their nonperforming loan ratio to below its post-crisis peak.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: debt, euro area, Europe, European Central Bank, non-performing loans, recession | Leave a comment »
Posted on August 10, 2015 by iMFdirect
Ever wonder to what extent Russia depends on oil revenues—and what happens to such an economy when crude prices fall by half? Or what the tangible effects are of sanctions when a country falls out of favor with its trading partners?
Well the IMF’s latest annual assessment of Russia’s economy shows cheap oil and sanctions together have helped drag the country into a recession.
Filed under: Advanced Economies, Economic outlook, Economic research, Europe, Globalization, International Monetary Fund | Tagged: advanced economies, economic growth, Europe, global economy, oil prices, Russia | Leave a comment »
Posted on June 14, 2015 by iMFdirect
By Olivier Blanchard
(Versions in 中文, Français, ελληνικά, عربي, and Español)
The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week. At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?
In the program agreed in 2012 by Greece with its European partners, the answer was: Greece was to generate enough of a primary surplus to limit its indebtedness. It also agreed to a number of reforms which should lead to higher growth. In consideration, and subject to Greek implementation of the program, European creditors were to provide the needed financing, and provide debt relief if debt exceeded 120% by the end of the decade.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Employment, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Multilateral Cooperation, Politics, Public debt, Reform | Tagged: Europe, European Commission, fiscal adjustment, Greece, Olivier Blanchard, pension, pension reform | 11 Comments »
Posted on May 7, 2015 by iMFdirect
By Shekhar Aiyar, Bergljot Barkbu, and Andreas (Andy) Jobst
If financing is the lifeblood of European small businesses, then the effect of the financial crisis was similar to a cardiac arrest. The flow of affordable credit from banks was choked off and small and medium-sized enterprises (SMEs) were hit hardest. Today, with bank lending still recovering from that shock, smart policy actions could open up securitization as a source of financing to help small businesses start up, flourish and grow.
SMEs are vital to the European economy. They account for 99 out of every 100 businesses, two in every three employees, and 58 cents of each euro of value added of the business sector in Europe. Improving access to finance would therefore not only revive small businesses, but also support a strong and lasting recovery for Europe as a whole.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Finance, Globalization, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: bank lending, bond markets, capital markets, credit, EU, Europe, France, Germany, infrastructure, Italy, private investment, Securitization, small and medium-sized enterprises, Spain | Leave a comment »
Posted on May 5, 2015 by iMFdirect
By Reinout De Bock, Andrea Maechler, and Nobuyasu Sugimoto
(Versions in Français and deutsch)
Low interest rates in the euro area pose substantial challenges to the life insurance industry. Insurers—particularly in Germany and Sweden—offer their clients long-term policies, sometimes more than 30 years, without holding assets of a correspondingly long duration. Moreover, many policies contain generous return guarantees, which are unsustainable in today’s low interest rate environment.
In 2014, stress tests showed European life insurers are vulnerable to a “Japanese-like” scenario.
Filed under: Advanced Economies, Economic outlook, Economic research, Europe, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Multilateral Cooperation, Reform | Tagged: Europe, European Union, Germany, interest rates, Japan, Life insurance, pension, stress tests, Sweden, United States | Leave a comment »
Posted on March 31, 2015 by iMFdirect
By Yan Liu, Kenneth Kang, Dermot Monaghan, and Wolfgang Bergthaler
Six years after the global financial crisis, Europe continues to be weighed down by high levels of corporate debt and millions of nonperforming loans. Small and medium-sized enterprises (SMEs) bear a disproportionately heavy burden. Their nonperforming loan ratios are on average more than double those of their larger corporate cousins. This is worrisome. SMEs are the lifeblood of the European economy, comprising 99 percent of all businesses and employing nearly two of every three workers in Europe. Given the importance of smaller businesses to the economy, addressing their problem loans could lay the foundation for a more robust and sustainable economic recovery.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Financial Crisis, Fiscal policy, Government, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: Cyprus, euro zone, Europe, European Central Bank, Greece, Ireland, non-performing loans, nonperforming loans, small and medium-sized enterprises | Leave a comment »