Tharman Sees “Greater Global Policy Resolve”


“Although the economic environment has weakened, the policy resolve has strengthened.” This is how Tharman Shanmugaratnam, Singapore’s Deputy Prime Minister and Minister for Finance , who is Chair of the IMF’s policy-setting committee, described the outcome of the IMF-World Bank annual meetings in Tokyo.

Growth is slower than anyone expected,” he admitted in a video interview.  “It is slower in Europe, it is not as fast as it should be in the United States, not as fast as it should be to bring unemployment down, and it is slowing in Asia to a greater extent than was expected. Tharman is chair of the 24-member IMFC.

“But we are now in a much better situation than six months ago when it comes to policy solutions.” He said there had been major steps forward in Europe “despite some disagreement on individual pieces.”  But underlying problems in the Eurozone, budget problems in the United States, and structural problems in global economy are longer term problems and “cannot be fixed quickly.”

For a quick brief on the outcomes from the meetings in Tokyo, take a look at:

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Restoring Jobs by Restoring Growth


By Min Zhu

Over 200 million people are unemployed around the world, with double-digit jobless rates in many European countries and in many emerging markets. Youth unemployment and long-term unemployment are at alarming levels.

The number of unemployed people is nearly 16 million higher today than in 2007 among countries where labor markets are tracked regularly by the IMF. Much of this increase has been in advanced economies (Chart 1).

The need to tackle the unemployment crisis in these economies is self-evident. But what is to be done?

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Top 20 — iMFdirect’s Top 20 list


Three years after the launch of iMFdirect as a forum for discussing economic issues around the world, we look back at some of our most popular posts.

The IMF blog has helped stimulate considerable debate about economic policy in the current crisis, on events in Europe and around the world in Asia, Africa, Latin America, and the Middle East, on fiscal adjustment, on regulating the financial sector, and the future of macroeconomics–as economists learn lessons from the Great Recession.

As readers struggled to understand the implications of the crisis, our most popular post by far was IMF Chief Economist Olivier Blanchard’s Four Hard Truths, a look back at 2011 and the economic lessons for the future.

Here’s our Top 20 list of our most popular posts by subject (from more than 300 posts):

1.  Global Crisis: Four Hard Truths; Driving With the Brakes On

2.  Financial Stability: What’s Still to Be Done?

3.  Fiscal Policy:  Ten Commandments ; Striking the Right Balance

4.  Macroeconomic Policy: Rewriting the Playbook;  Nine Tentative Conclusions ; Future Study

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Japan Stands Up


By Jerry Schiff

(Version in  日本語)

As a Japanese proverb has it: “Knocked down seven times, get up eight.”

In a display of its resilience, Japan is getting up once again after the devastating earthquake and tsunami of a year ago.  But the world’s third largest economy still faces multiple challenges, and in our latest assessment of the country’s economy, the Japanese mission team at the International Monetary Fund has proposed a range of mutually reinforcing policies to strengthen confidence, raise growth and help restore Japan’s economic vitality.

A year and four months ago, Japan was reeling from the Great East Japan earthquake and accompanying devastation.  As well as the tragic loss of life, the economy was badly shaken.  Supply chain disruptions brought production in parts of Japan to a virtual halt. Yet, since then, the country has shown its resilience, with reconstruction contributing to strong first quarter growth of 4¾ percent.

But despite this hopeful sign, all is not well.

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India Can Revive Investment by Learning from Itself


By Laura Papi and Kiichi Tokuoka*

India’s investment,  the main  driver of economic growth in the mid-2000s when the country was growing in excess of 9 percent a year, has been sluggish for the past five years.

Private consumption is growing at a rate comparable to pre-crisis levels, but investment has not regained its strength.

The culprit is corporate investment: its share in GDP has fallen to about 10 percent—4 percentage points lower than that in 2007/08. This is a serious concern as India needs more supply capacity.

Reserve Bank of India (RBI)  Governor Subbarao recently said that India’s “non-inflationary rate of growth is about 7 percent,” down from 8.5 percent before the global financial crisis, suggesting that supply constraints—for example in power, coal, and land—have become increasingly binding.

Many reasons have been put forward to explain the investment malaise.

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Why the Arab World Needs an Economic Spring


By Nemat Shafik

(Version in عربي)

What strikes you on a trip to the Middle East is that everyone is talking politics—all of the time. That had been the case in countries like Lebanon where it is a national pastime, but it is a new phenomenon in countries across North Africa and the Gulf.

Constitutions are being rewritten, political parties and youth groups are vibrant, and everyone has an opinion on current events. The older generation seems worried by the uncertainty associated with change. The young generation continues to be energized.

Need for an economic rethink

But, what I noticed during a week of travel through the region is that almost no one is talking economics, and that is a worry. Because while 2011 was a year of major transitions in the political domain, almost every economic indicator in the non-oil countries went in the wrong direction. Growth halved, unemployment rose, reserves came under pressure and deficits ballooned as governments responded to social pressures by increasing spending on wages and generalized subsidies.

New governments across the region are keen to respond to the demand for jobs and justice that brought them to power but are quickly faced with the hard reality of limited resources and powerful vested interests.

So, just as the “Arab Spring” opened a debate about politics in the Middle East, we now need an “Economic Spring” on how to rethink the region’s economic future.

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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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