Who Wins and Who Loses As China Rebalances


By Serkan Arslanalp, Thomas Helbling, Jaewoo Lee, and Koshy Mathai

Version in 中文  (Chinese)

China’s economy leaves nobody indifferent. The world is watching closely as the second largest economy in the world is shifting its growth model from an export-driven one to one centered on household consumption. As China’s economy slows and rebalances, its impact is being felt on an already fragile global economy, and particularly in the rest of the Asia region. Our recent studies show that while China’s rebalancing will adversely affect some Asian economies, it will also open opportunities for several others.

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Public Roads with Private Money: A Way Ahead


By iMFdirect

When you drive over potholes on downtown streets, are forced to make large detours to cross rivers lacking bridges, and finally arrive to find no cell coverage, connections between the global infrastructure investment gap and your pension fund might not be the immediate thing that comes to mind. But it should, because:

  • Huge pools of available assets: pension funds, insurance companies, mutual funds and sovereign wealth funds sit on $100 trillion in assets. To compare: U.S. nominal GDP in the third quarter of last year was $18 trillion.
  • Huge infrastructure investment gap: between $1 to 1.5 trillion per year worldwide.

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China and Africa: Will the Honeymoon Continue?


By Wenjie Chen and Roger Nord

(Versions in عربي中文, Français, Português, and Español)

China’s President Xi Jinping’s recent pledge of US$60 billion in financial support over the next three years illustrates the depth of the partnership between China and Africa.

However, China’s shift from an investment-heavy, export led growth strategy to an economic model that relies more on domestic consumption has led to a dramatic decline in commodity prices. Lower commodity prices and lower volumes of trade have hit sub-Saharan Africa’s commodity exporters hard. But over the medium term, this shift may offer sub-Saharan African countries the opportunity to diversify their economies away from natural resources, and create jobs for their young populations, provided they pursue the right policies to foster competitiveness and integrate into global value chains.

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Trading Out of Trouble in Latin America


By Natalija Novta and Fabiano Rodrigues Bastos

(Versions in Español and Português)

Growth in Latin America and the Caribbean is suffering a double whammy—economic activity has slowed down sharply and the medium-term outlook continues to deteriorate. It is therefore not surprising that policymakers across the region are eagerly searching for ways to revitalize growth.

One answer may be more trade—both within the region and with the rest of the world. Our new study analyzes the export performance in developing and emerging market regions over the past two decades to assess the potential for future export growth in Latin America. We find evidence that most countries in the region “undertrade” compared to what standard models would predict. This has been an entrenched problem for almost a quarter of a century, partly as a result of the region’s geography and a legacy of protectionist policies.

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Sovereign Wealth Funds in the New Era of Oil


By Rabah Arezki, Adnan Mazarei, and Ananthakrishnan Prasad 

(Versions in عربي and 中文)

As a result of the oil price plunge, the major oil-exporting countries are facing budget deficits for the first time in years. The growth in the assets of their sovereign wealth funds, which were rising at a rapid rate until recently, is now slowing; some have started drawing on their buffers.

In the short run, this phenomenon is not cause for alarm. Most oil exporters have enough buffers to withstand a temporary drop in oil prices. But what will happen if low oil prices persist, and how will policymakers react?

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The Quest for Robust and Synchronized Growth


Maurice Obstfeld2By Maurice Obstfeld

(Versions in Españolعربي, 中文Français, Русский and 日本語)

Today, we released the October 2015 World Economic Outlook.

Our forecasts come at a moment when the world economy is at the intersection of at least three powerful forces.

First, China’s economic transformation – away from export- and investment-led growth and manufacturing, in favor of a greater focus on consumption and services. This process, however necessary and healthy in the longer term, has near-term implications for China’s growth and its relations with its trade partners.

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Emerging Market Corporate Debt in Foreign Currencies


By Selim Elekdag and Gaston Gelos

Debt held by firms in emerging market economies in a currency other than their own poses extra complications these days. When the U.S. Fed does eventually raise interest rates, the accompanying further strengthening of the U.S. dollar will mean an emerging market’s own currency will depreciate against the higher value of the U.S. dollar, and would make it increasingly difficult for firms to service their foreign currency-denominated debts if they have not been properly hedged.

In the latest Global Financial Stability Report, we find that firms in emerging markets that have increased their debt-to-assets ratios have generally also increased their overall sensitivity to changes in the exchange rate—commonly called exchange-rate exposure.

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