India’s Economy: Stamina Is The Name Of The Game


by Laura Papi and Rahul Anand*

So far 2013 has been a breath of fresh air in terms of economic news: financial markets have rallied and economic indicators have started to surprise on the upside. In India, the rupee has strengthened and the Bombay Stock Exchange index (Sensex) crossed the 20,000 mark for the first time in two years.  Industrial production has started picking up.

So is India’s growth about to go back to 8-9 percent? The short answer is no. But we need to look back to understand why India’s growth has decelerated to a decade low and why the slump, which has hit investment particularly hard, has persisted for over a year. As structural problems are at the root of the slowdown, so structural reforms must be at the core of the solution.

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The Power of Cooperation


by iMFdirect

The planet’s most successful species are the great cooperators: ants, bees, termites, and humans.

In an article in the new issue of Finance & Development magazine, President Bill Clinton shares his experience working with governments, business, and civil society as part of his Clinton Global Initiative.

He says they are making the most progress in places where people have formed networks of creative cooperation where stakeholders come together to do things better, faster and cheaper than any could alone.

Mind The Gap: Policies To Jump Start Growth in the U.K.


By Ajai Chopra

The U.K. economy has been flat for nearly two years. This stagnation has left output per capita a staggering 14 percent below its precrisis trend and 6 percent below its pre-crisis level.

Weak growth has kept unemployment high at 8.1 percent, with youth unemployment an alarming 22 percent.

The effects of a persistently weak economy and high long-term unemployment can reverberate through a country’s economy long into the future—commonly referred to by economists as hysteresis.

Our analysis of such hysteresis effects shows that the large and sustained output gap, the difference between what an economy could produce and what it is producing, raises the danger that a downturn reduces the economy’s productive capacity and permanently depresses potential GDP. 

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Africa and the Great Recession: Changing Times


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?

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Showcasing a More Confident Africa


Christine Lagarde

Africa is on the move. While several other regions of the world have to address slowdown and uncertainty, many countries in Africa have been facing a contrasting challenge: to respond to the growing demand for their bountiful resources and manage rising investment in much-needed infrastructure. But at the same time, growing economic uncertainty in the world is raising concerns across the continent where vulnerability to global shocks remains high.

Christine Lagarde is visiting Africa for the first time as Managing Director of the International Monetary Fund this week and she says that she hopes to deepen the Fund’s partnership with Africa.

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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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Africa: Changing the Narrative


Jeremy CliftBy Jeremy Clift

Enduring poverty and conflict are so stark in Africa that it is sometimes difficult to see what else is happening.

In April 2011, a study published by the Columbia Journalism Review titled “Hiding the Real Africa” documented how easily Africa makes news headlines in the West when a major famine, pandemic, or violent crisis breaks. But less attention is given to positive trends and underlying successes.

In many cases, despite accelerated economic growth over the past 10 years, the rise of a middle class of consumers, and a more dynamic private sector attracting indigenous entrepreneurs, the narrative about Africa has remained focused on the bad news.

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


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? Continue reading

Keeping Asia from Overheating


By Anoop Singh

Asia’s vigorous pace of growth has seen the region play a leading role in the global recovery. But, there are also now growing signs of price pressure across the region’s goods and asset markets.

Headline inflation in Asia has accelerated since October 2010, mainly owing to higher commodity prices. There are, of course, variations in how much this has affected inflation across Asia, partly reflecting differences in the shares of food and energy items in expenditures.

But there are signs that higher commodity prices are spilling over to a more generalized increase in inflation. Continue reading

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