Posted on May 18, 2011 by iMFdirect
By Antonio Borges
(Versions in Español, Français, Português, Русский)
With all the anxiety generated by the troubles of Portugal, Greece, and Ireland, it is easy to forget that a different part of Europe was in the spotlight two years ago, facing equally dire predictions of bank runs, fiscal ruin, and devaluation.
Today, many economies in emerging Europe are quietly staging a strong comeback. Most impressive is the turnaround in the three Baltic countries, which suffered record deep recessions in the wake of the 2008/09 financial crisis. Take Lithuania, which grew an eye-catching 14.7 percent in the first quarter of 2011. But many other countries in the region are seeing strong growth as well. (more…)
Filed under: Economic outlook, Emerging Markets, Europe, IMF, International Monetary Fund | Tagged: asset price bubbles, boom-bust cycle, capital inflows, consumption, credit default swaps, current account deficits, domestic demand, economic growth, economic output, exports, growth potential, investment, Macroeconomic policies, markets, structural policies | 2 Comments »
Posted on May 13, 2011 by iMFdirect
By Ruud de Mooij
In February, President Obama said “Companies are taxed heavily for making investments with equity; yet the tax code actually pays companies to invest using leverage”. And he is right: the corporate tax code in the United States creates a significant bias toward debt finance over equity.
Of course, the U.S. is not unique. In most of Europe, Asia and elsewhere in the world, the tax advantages of debt finance are even bigger than in the U.S.
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.
The 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 have always thought. (more…)
Filed under: Advanced Economies, Financial Crisis, Fiscal policy, International Monetary Fund | Tagged: capital gains, corporate income tax, corporate profits, debt bias, debt finance, dividends, equity, financial crises, global financial crisis, interest deductiblity, investment, leverage, tax avoidance, tax deduction, tax incentives | Leave a Comment »
Posted on May 9, 2011 by iMFdirect
By Dominique Desruelle and Catherine Pattillo
(Versions in 中文, Português, Español, Русский)
The so-called BRIC nations—Brazil, Russia, India and China—could be a game changer for how low-income countries build their economic futures.
The growing economic and financial reach of the BRICs has seen them become a new source of growth for low-income countries (LICs).
LIC-BRIC ties—particularly trade, investment and development financing—have surged over the past decade. And the relationship could take on even more prominence after the global financial crisis, with stronger growth in the BRICs and their demand for LIC exports helping to buffer against sluggish demand in most advanced economies.
The potential benefits from LIC-BRIC ties are enormous.
But, so too are challenges and risks that must be managed if the LIC-BRIC relationship to support durable and balanced growth in LICs. (more…)
Filed under: Emerging Markets, growth, International Monetary Fund, Low-income countries | Tagged: balanced and sustainable growth, Brazil, BRICs, China, commercial financing, commodity trap, concessional lending, development financing, government debt, growth drivers, India, infrastructure development, investment, investment financing, macroeconomic stability, manufacturing, Russia, structural changes, tax incentives, trade, trade preferences, transparency | 5 Comments »
Posted on April 21, 2011 by iMFdirect
By Leslie Lipschitz and Bas Bakker
For all the talk today about capital flows into emerging economies, the topic has actually been debated for many years within the IMF.
For a decade or more, we have grappled with the idea that very large capital flows into successful emerging market countries were almost inevitable and would prove extremely difficult to manage.
And now, with capital flows becoming larger and more volatile, old policy dilemmas are resurfacing with even greater force.
Filed under: Economic Crisis, Emerging Markets, Europe, Financial Crisis, International Monetary Fund | Tagged: asset price bubbles, capital flows, credit growth, current account deficits, exchange rate, exchange rate flexibility, exchange rate regimes, external vulnerability, fixed exchange rates, foreign currency exposure, foreign exchange risk, interest rates, investment, macroprudential policies, monetary policy, rates of return, risk premiums | 1 Comment »
Posted on October 29, 2010 by iMFdirect
By Masood Ahmed
(Version in عربي )
With the global economy on the mend, countries in the Middle East and North Africa are witnessing a pickup in trade and economic growth. Aided by rising oil prices and production levels and supportive fiscal policies, economic growth for the region as a whole is projected to exceed 4 percent in 2010, almost double what it was in 2009.
In contrast, and unlike many emerging markets elsewhere, the region’s oil-importing countries saw only a mild slowdown in economic growth last year to 4½ percent and are likely to see growth nudge up to around 5 percent this year. However, as our October 2010 Regional Economic Outlook for the Middle East points out, that growth rate is well below the average of 6½ percent a year required to create the 18 million jobs needed over the next decade to absorb new labor-market entrants and eliminate chronically high unemployment. (more…)
Filed under: Economic outlook, International Monetary Fund, Middle East, عربي | Tagged: business environment, competitiveness, economic growth, education, employment, high productivity, infrastructure, investment, labor markets, Regional Economic Outlook: Middle East and Central Asia, regulation, structural reform, tariffs, unemployment | Leave a Comment »
Posted on October 25, 2010 by iMFdirect
By Anoop Singh
Continuing my travels through Asia for the launch of our October 2010 Regional Economic Outlook: Asia and Pacific, I am writing to you today from Singapore. In my last post, I focused on the near-term outlook and challenges for Asia. Today, I turn to the key medium-term challenge—the need to rebalance economies in the region away from heavy reliance on exports by strengthening domestic sources of growth. This is against a backdrop of the need to rebalance global growth that was emphasized over the weekend by the ministers of the Group of Twenty industrialized and emerging market countries.
Heavy reliance, arguably over-reliance, on exports is a common challenge across Asia. Yet, the policies to address it will differ among the countries in the region. Much of the public discussion focuses on ways to increase consumption, and this is something the IMF has written about extensively in the past. But the role of investment in rebalancing growth is equally important and something that should not be overlooked. (more…)
Filed under: Asia, Economic outlook, IMF, International Monetary Fund | Tagged: ASEAN, Asian financial crisis, Association of Southeast Asian Nations, business environment, consumption, economic rebalancing, financial infrastructure, foreign investment, G-20, investment, investment climate, medium-term challenge, newly industrialized economies, private domestic demand, public-private partnerships, rebalance global economy, Regional Economic Outlook: Asia and Pacific | 1 Comment »