In our daily recap for Thursday, April 13, we spotlight the IMF managing director’s policy agenda, the debate on the global economy, regional economic outlooks, and more.
The global economy is at another highly uncertain moment, as tentative signs of stabilization earlier this year have receded and the outlook is increasingly risky, IMF Managing Director Kristalina Georgieva said in her Global Policy Agenda press conference. At the same time, divisions within and across countries are deepening, exacerbated by rising fragmentation. Strong policy action is needed together with pragmatic approaches to find areas of common ground to respond to shared challenges. The IMF is proactively engaging with members to chart a clear course to a stronger and more sustainable path for the global economy, she added. “The world economy has proven remarkably resilient to the multiple shocks of the last three years, but it is yet to overcome the combination of weak growth and sticky inflation,” Georgieva said. Common priorities include restoring price stability and safeguarding financial stability, advancing structural transformations and countering fragmentation, and showing solidarity with the most vulnerable countries.
Panelists at a debate on the global economy broadly agreed that the world would be in better shape in a year’s time, but worried about the risks from geopolitical fragmentation. IMF Managing Director Kristalina Georgieva said the world economy had proved remarkably resilient in the face of repeated shocks, but that geopolitical tensions threatened global growth. For finance professor Raghuram Rajan security considerations were becoming a “front for protectionism of all kinds” and the greatest contribution the United States could make to global development would be to limit fragmentation to strategic areas. Nadia Fettah, Morocco’s finance minister, said fragmentation was a concern for countries like hers that support international cooperation but suffer from problems created a far.“Fragmentation is a risk for the economies of Africa and emerging markets that are the engines of growth.” Poland’s Prime Minister Mateusz Morawiecki added that Russia’s invasion of Ukraine and other geopolitical ructions called for a rethinking of the established economic models and production chains.
Reducing protectionism in services will reduce inequality, especially in industrial economies where inequality is becoming more prevalent.
RAGHURAM RAJAN, PROFESSOR AT THE UNIVERSITY OF CHICAGO’S BOOTH SCHOOL OF BUSINESS
Asia is emerging as a pillar strength amid what is shaping up as an otherwise challenging year for the global economy, and China’s reopening will provide fresh momentum. That’s the latest view on the regional outlook from Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, during his briefing. The region will contribute more than 70 percent to global growth this year, though it still faces challenges from inflation, debt, and financial vulnerabilities, he said. The department projects that growth in Asia will accelerate this year to 4.6 percent, a faster pace than forecast in October, largely because of China’s reopening.
WATCH THE EVENT | READ THE BLOGGrowth in the Middle East and North Africa will slow to 3.1 percent this year due to tight macroeconomic policies, OPEC-plus production cuts and a recent deterioration in global financial conditions, Jihad Azour, the director of the IMF’s Middle East and Central Asia Department, said during a press conference. Growth in Central Asia and the Caucasus is also expected to slow, to 4.2 percent. Azour discussed the impact of recent financial market instability on the region’s banks, stressing that spillovers have been limited. Monetary policy should focus on maintaining or regaining price stability.
WATCH THE EVENTGrowth in Latin America and the Caribbean is likely to slow to 1.6 percent this year, even as high inflation continues to pose a cost-of-living crisis for the most vulnerable. “We attach an important priority to quickly bringing inflation back to central banks’ target,” Nigel Chalk, Deputy Director of the IMF’s Western Hemisphere Department, said at a press conference. Fiscal policy should help monetary policy in reducing demand pressures to mitigate the risk that inflation becomes entrenched. Tax systems should be redesigned to raise revenues and ensure that the wealthy pay more.
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China’s reopening will provide fresh momentum for economic growth in Asia and the Pacific. As the Chart of the Day shows, normally the strongest effect from China for the region would be from its demand for investment goods, but this time the biggest effect is from demand for consumption from the country.
The Bank of Canada was among the first central banks to raise interest rates coming out of the pandemic, increasing them by a total of 425 basis points since March 2022. Yet the rate at which Canadian consumers expect prices to rise in the future remains higher than actual inflation, now running at 5 percent. “Inflation expectations need to come down more if we’re going to get inflation down to target,” Bank of Canada chief Tiff Macklem said during a Governor Talks. One lesson central banks have learned is that communication makes it easier to anchor inflation expectations, Macklem told the acting director of the IMF’s Western Hemisphere Department, Nigel Chalk. “Monetary policy works better when everybody understands what we’re doing and…people can plan their budgets with confidence.” The central bank regularly releases growth and inflation projections and recently began to publish summaries of deliberations by the Governing Council, the policy-making body.
IMF concessional financing has increased more than four-fold since the onset of Covid. The IMF has called for $4.7 billion in loan resources and $1.6 billion in additional subsidy resources to maintain interest-free support for the most vulnerable countries in the world.
India Finance Minister Nirmala Sitharaman participates in a G20 Finance Ministers gathering.
IMF staff arranges the country nameplates.
A participant walks into the IMF building while a security officer stands guard.
African Department Director Abebe Aemro Selassie presents the latest Regional Economic Outlook for Sub-Saharan Africa and answers questions
Event DetailsMr. Kammer will address questions about Europe’s economy, including potential risks of recession and assessments of the region’s financial and banking sectors..
Event DetailsThe discussion will focus on central banks’ strategies to reduce inflation.
Event Details