Keeping Asia from Overheating

Posted on May 19, 2011 by iMFdirect

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. (more…)

Filed under: Asia, Economic outlook, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , | 5 Comments »

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

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: , , , , , , , , , , , , , , | Leave a Comment »

BRICs and Mortar—Building Growth in Low-Income Countries

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: , , , , , , , , , , , , , , , , , , , , , | 5 Comments »

Raising Competitiveness: Recipe for Tapping into the Middle East’s Growth Potential

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: , , , , , , , , , , , , , | Leave a Comment »

Investing in a Rebalancing of Growth in Asia

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: , , , , , , , , , , , , , , , , | 1 Comment »

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