Trade Winds—Has the Spectre of Protectionism Blown Away?

Posted on January 5, 2012 by iMFdirect

The global crisis has pushed trade reforms off—or at least to the edge of—the political radar screen. But shying away from improving the trade system may actually jeopardize growth and jobs, and in these tough economic times that seems a little like cutting off your nose to spite your face.

The Fund may not be the main player on the trade ‘block’, but we certainly take an interest given its macroeconomic importance. And, in the spirit of moving forward the discussion, and indeed the policies in support of, trade integration, the Fund has three main lines of work in the pipeline.

Filed under: Advanced Economies, Emerging Markets, Globalization, growth, IMF, International Monetary Fund, Low-income countries, Multilateral Cooperation | Tagged: , , , , , , , , , , , , | 6 Comments »

Latin America: What’s Ahead in 2012?

Posted on January 4, 2012 by iMFdirect

A few days after the first sunrise of 2012 kissed the shores of Latin America, it is natural to ask: What does the New Year hold for the region’s economies, especially with Europe still under stress? For sure, a dimmer economic environment, here and abroad. Growth has softened in the larger countries of the region. Looking North, the United States is growing a bit more, but elsewhere activity is softening, including in China—an increasingly important customer for the region’s commodities. Perhaps more importantly, global financial markets are still strained, because many questions about advanced economies remain unanswered. What should countries do in the face of this risky outlook? A lot depends on their current macroeconomic situation.

Filed under: Economic Crisis, Economic outlook, Emerging Markets, Europe, Finance, Financial Crisis, growth, International Monetary Fund, Latin America | Tagged: , , , , , , , , , , , , , , , | 5 Comments »

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

Posted on November 3, 2011 by iMFdirect

One of my all-time favorite movies is “The Third Man” starring Orson Welles and Joseph Cotten. 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 2009 as the government’s response to the global financial crisis unfolded, causing bank lending to expand by close to 20 percentage points in less than a year. At 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 were gearing up to provide more credit.

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. This worries me for four broad reasons.

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

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.

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

Capital Flows to Asia Revisited: Monetary Policy Options

Posted on June 2, 2011 by iMFdirect

Capital flows emerging Asia should be high on the ‘watch list’ for policymakers in the region. But, perhaps, not in the way we had previously anticipated. Twelve months ago we were keenly attuned to the risks posed by the foreign capital that flooded into Asia from mid-2009 onwards. Now, what we’re seeing is not really all that “exceptional.”

With the recent surge, net overall capital flows to emerging have not surpassed the peaks reached in past episodes of large inflows to the region. Of course, that’s not to say it’s all blue skies. The nature of inflows is different this time—dominated by portfolio flows—and that poses new challenges and risks for policymakers.

Filed under: Asia, Economic outlook, Emerging Markets, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , | Leave a Comment »

Capital Flows to the Final Frontier

Posted on May 24, 2011 by iMFdirect

Sub-Saharan Africa’s “frontier markets”—the likes of Ghana, Kenya, Mauritius, and Zambia—were seemingly the destination of choice for an increasing amount of capital flows before the global financial crisis. Improving economic prospects in these countries was a big factor, but frankly, so too was a global economy awash with liquidity.

Then the crisis hit. And capital—particularly in the form of portfolio flows—was quick to flee these countries as was the case for so many other economies.

Fast forward to 2011. Capital flows are coming back to the frontier, but in dribs and drabs. In our recent Regional Economic Outlook we examined the experience of sub-Saharan Africa’s frontier markets, with a view to understanding how they can best make use of these inflow to meet their own development and growth objectives.

Filed under: Africa, Economic outlook, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , | 1 Comment »

To Owe or Be Owned—Depends on How You Tax It

Posted on May 13, 2011 by iMFdirect

Corporate tax codes in the United States, most of Europe, Asia and elsewhere in the world, create a significant bias toward debt finance over equity. The crux of the issue is that interest paid on borrowing can be deducted from the corporate tax bill, while returns paid on equity—dividends and capital gains—cannot.

This debt distortion is not new. What is new, however, is that we have come to realize that excessive debt (or leverage) is much more costly than we had. The global financial crisis was a stark lesson about the risks of excessive leverage ratios in financial institutions.

Designing a better system will ultimately pay off. And now is the time for change. A recent IMF Staff Discussion Note offers two alternatives that reduce or eliminate the more favorable tax treatment of debt.

Filed under: Advanced Economies, Financial Crisis, Fiscal policy, International Monetary Fund | Tagged: , , , , , , , , , , , , , , | Leave a Comment »

Seven Pillars of Prosperity—Diversifying Economic Growth in the Caucasus and Central Asia

Posted on May 5, 2011 by iMFdirect

Medium-term economic growth prospects in the Caucasus and Central Asia region are strong. But, to secure ongoing prosperity, the eight countries of the region—Armenia, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan—will need to look beyond traditional sources of growth.

The challenge for policymakers will be to foster new and more diverse growth drivers, outside mining, oil, and gas. There are seven policy pillars that can help them do that, including strengthening economic and financial ties within the region.

Filed under: Economic outlook, Emerging Markets, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , | 3 Comments »

Confessions of a Dismal Scientist—Africa’s Resilience

Posted on May 3, 2011 by iMFdirect

Like many economists, I tend to fear the worst. I have witnessed phenomenal changes for the better in sub-Saharan Africa over the past 20 odd years. Part of me still worries that this trajectory will not endure. But, the more I see of the region’s economic performance and outlook, the more I’m changing my tune.

Good macroeconomic policies in many more countries the years before the crisis put them in good stead to weather the crisis relatively well. As we report in our latest Regional Economic Outlook, output in sub-Saharan Africa looks set to expand by around 5½ this year and 6 percent in 2012.

My latest worry is the recent sharp increase in food and fuel prices on world markets. To help minimize the dislocation that this shock may entail, countries should consider a two-pronged policy response.

Filed under: Africa, Economic outlook, International Monetary Fund, Low-income countries | Tagged: , , , , , , , , , , , , , | 1 Comment »

Connecting the Dots Between Global Risks

Posted on April 21, 2011 by iMFdirect

Finance ministers and central bank governors from around the world, gathering at the Spring Meetings of the IMF and World Bank in Washington last week. With the recovery solidifying but still fragile, ministers put the spotlight on how to strengthen the IMF’s surveillance—its economic assessment and analysis—to help countries take the action needed to address risks and avoid future crises.

As the meetings were wrapping up in Washington DC, the IMF’s First Deputy Managing Director talked about the outcomes of the meetings. While there are concerns about risks in the global economy, there was important progress on a “multilateral cooperative approach on the various challenges we face.” Watch his interview to hear more about what Mr. Lipsky has to say about progress by the G-20 and about the likely changes to the IMF’s multilateral surveillance.

Filed under: Annual Meetings, Economic Crisis, Financial Crisis, IMF, International Monetary Fund | Tagged: , , , , , , , , , , | 2 Comments »

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