Reducing Risks in Asia with Macroprudential Policies


Edda ZoliBy Edda Zoli

(Version in 中文, and 日本語)

Booming real estate markets, rapid credit growth and—at least before the Fed’s tapering announcement last year—sustained capital inflows have raised financial stability challenges across many parts of Asia. To address them, policymakers have increasingly made use of macroprudential policies that address the stability of the financial system as a whole rather than that of individual institutions. In some cases they have also resorted to capital flow management measures to counter large capital inflows.

As new analysis in the IMF Asia and Pacific Department’s latest Regional Economic Outlook finds, macroprudential policies, especially measures related to the housing market, have helped mitigate the buildup of financial risks in Asia. In the event of sharp decreases in credit and asset prices going forward, however, it may become useful to ease certain of these measures to avoid excessive deleveraging.

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Africa’s Success: More Than A Resource Story


Antoinette SayehBy Antoinette M. Sayeh

When meeting with people outside Africa, I’m often asked whether Africa’s growth takeoff since the mid-1990s has been simply a “commodity story”—a ride fueled by windfall gains from high commodity prices. But finance ministers and other policymakers in the region, and I was one of them, know that the story is richer than that.

In this spirit, in our latest Regional Economic Outlook: Sub-Saharan Africa a team of economists from the IMF’s African Department show that Africa’s continued success is more than a commodity story.  In fact, quite a few economies in the region have become high performers without basing their success on natural resources—thanks in no small part to sound policymaking.

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Africa: Second Fastest-Growing Region in the World


Antoinette SayehBy Antoinette M. Sayeh 

Sub-Saharan Africa is the second fastest-growing region of the world today, trailing only developing Asia.  This is remarkable compared to the current complicated state of the global economy, with Europe still struggling and the United States slowly on the mend.

In 2012, Sub-Saharan Africa maintained solid growth, with output growth at 5 percent on average. The factors that have supported the region through the Great Recession—strong investment, favorable commodity prices, and generally prudent macroeconomic management—continued to be at play.

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Latin America: Riding the Global Financial Waves


By Gustavo Adler and Camilo E. Tovar

(Version in Español)

Latin America has a long history of accidents that have occurred while navigating turbulent financial international waters. With risks looming over the world economy, should the region worry about new global financial waves?

Global financial markets have seen frequent bouts of severe stress since 2008, although this isn’t really anything new for the region. Global financial shocks have occurred on average every 2½ years since 1990, with significant effects on Latin America.

But how costly are these shocks in terms of domestic output, and is Latin America better placed to cope with them this time?

In Chapter 3 of the IMF’s latest Regional Economic Outlook: Western Hemisphere, we analyze whether changes in underlying fundamentals have made the region more or less vulnerable over time. The analysis, which complements our work on the effects of terms-of-trade shocks, looks at what country features and policies make a difference. We focus here solely on the impact of the financial shocks by isolating the effect from commodity prices and global demand shocks.

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Regional Spillovers in South America: How “Systemic” is Brazil?


By Gustavo Adler and Sebastián Sosa

(Version in Español)

The risks that policies and shocks in major economies can spillover on other countries and regions have become a matter of renewed concern since the global crisis of 2008–09. Brazil is South America’s giant; how important is its influence on neighboring countries?

Brazil accounts for 60 percent of South America’s output and its economic fluctuations are closely correlated with those of many of its neighboring countries. This would appear to suggest that economic activity in Brazil’s neighbors is strongly influenced by Brazil’s business cycle.

But these close comovements could also reflect common global factors that affect all South American countries similarly, such as commodity prices, international financial conditions, and global demand.

Our latest Regional Economic Outlook: Western Hemisphere examines this question, quantifying the importance of spillovers from Brazil to the rest of South America.

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Confessions of a Dismal Scientist—Africa’s Resilience


By Abebe Aemro Selassie

(Version in Français)

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.

Old anxieties set aside

Until my latest source for anxiety took hold a few months ago (more on this in a moment), I’d worried about the impact of the global financial crisis on sub-Saharan Africa. The crisis hit just as many countries in the region were starting to enjoy a hard-earned period of economic growth, their best since at least the 1970s. I did not want this to be derailed by the crisis. Continue reading

Emerging Europe—Lessons from the Boom-Bust Cycle


By Ajai Chopra

Almost unnoticed, amid the difficulties in western Europe, the other half of the continent has begun to recover from the deepest slump in its post-transition period. The emerging economies in central and eastern Europe will grow by 3¾ percent this year and next—a relief after the 6 percent decline in 2009.

Why was the crisis so severe—and how do we avoid a repeat? We consider just that question in our fall 2010 Regional Economic Outlook: Europe. While the crisis was triggered by external shocks, it is clear that domestic imbalances and policies also played a key role. Continue reading

Continuing the Momentum—Asia’s Updated Economic Outlook


By Anoop Singh

Asia’s leadership of the global economic recovery is continuing unabated. And, even though heightened risks mean there may be tough times ahead again, the region is well equipped to handle them.

Asia’s remarkably fast recovery from the global financial crisis continued in the first half of 2010, despite the recent tensions in global financial markets. In fact, GDP growth in the first quarter was generally stronger than we anticipated in our Regional Economic Outlook in April. And high-frequency indicators suggest that Asian economic activity remained brisk in the second quarter. Even more notable, this is true both for economies that escaped a recession in 2009, thanks to their relatively larger domestic demand bases (China, Indonesia, and India), and for the more export-oriented economies such as Japan, the Newly Industrialized Economies (NIEs), and the rest of the ASEAN.

Two growth engines

What explains the strong economic momentum across the region? It is simple. The two “engines of growth” that spurred Asia’s recovery in 2009— exports and private domestic demand—have remained robust in 2010.

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