Weekend Read Special Edition: Spring Meetings 2024
International Monetary Fund
191 member countries working together to improve lives through global growth and economic stability.
Georgieva Calls For “Foundational Reforms
Policymakers must deal decisively with inflation and debt and promote economic transformation to boost productivity and growth
Speaking at the Atlantic Council in Washington, the IMF managing director said global growth is marginally stronger on account of robust activity in the United States and many emerging market economies, but warned there are still plenty of things to worry about.
“The sobering reality is global activity is weak by historical standards and prospects for growth have been slowing since the global financial crisis,” she said.
The world has avoided a global recession and period of stagflation, but the IMF’s projection for medium-term growth of just above 3 percent is well below the historical average.
Georgieva called on countries to eliminate economic constraints and create opportunities to boost productivity growth, including through “foundational reforms” such as strengthening governance
New playbook
The pandemic, wars, and geopolitical tensions have changed the playbook for global economic relations, she said.
She called for more trade and cross-border investment flows to address global challenges and for more attention to how the benefits are shared in society.
“In a fast-changing and more turbulent world, bringing countries together to tackle challenges and pursue opportunities is more important than ever.”
Speaking to Atlantic Council president and chief executive Frederick Kempe, Kristalina Georgieva discussed geopolitics and protectionism, the US economic outlook, China’s global role, artificial intelligence, and the importance of thinking the unthinkable in risk analysis. Watch here.
World Must Prioritize Productivity Reforms to Revive Medium-Term Growth
The global economy has slowed over the past 15 years or so and the stronger growth rates of the past are unlikely to return without ambitious steps to enhance productivity, IMF economists write in a blog.
Without major technological advances or structural reforms, global economic growth could slip to 2.8 percent by 2030, well below the historical average of 3.8 percent, the authors say in the blog, which draws on a chapter of the April 2024 World Economic Outlook.
But a range of policies—from improving labor and capital allocation across companies to tackling labor shortages caused by aging populations in major economies—could collectively revive medium-term growth, they say.
“In the long run, innovation-driven policies will be crucial to sustaining global growth.”
?? Watch the IMF’s Nan Li and Diaa Noureldin talk to the New York Times’ Jeanna Smialek about how countries can boost their medium-term growth prospects.
Global growth will slow to just above 3 percent by 2029, according to five-year ahead projections in our latest World Economic Outlook, and could slip below this figure by the end of the decade. This threatens to reverse improvements to living standards and the unevenness of the slowdown between richer and poorer nations could limit the prospects for global income convergence.
Industrial Policy Is No "Magic Cure" for Slow Growth
Many countries are ramping up industrial policy to boost innovation in the hope of reigniting productivity and long-term growth.
In a blog based on a chapter of the Fiscal Monitor, IMF economists say that industrial policy—in which the government supports certain sectors—can drive innovation if done right. But striking the right balance is key, as history is full of cautionary tales of policy mistakes, high fiscal costs, and negative spillovers in other countries.
Governments should not see industrial policy as a magic bullet, the authors caution.? “Instead, well-designed fiscal policies that support innovation and technology diffusion more broadly, with an emphasis on fundamental research that forms the basis of applied innovation, can lead to higher growth” and accelerate the green transition.
?? Watch the IMF’s Era Dabla-Norris discuss industrial policy's costs and benefits with Reuters senior correspondent Andrea Shalal.
Rising Cyber Threats Pose Serious Concerns for Financial Stability
The risk of extreme losses from cyberattacks is increasing and could potentially cause funding problems for companies and even jeopardize their solvency, IMF economists write in a blog that draws on a chapter of the Global Financial Stability Report.
The risk of extreme losses from cyberattacks is increasing and could potentially cause funding problems for companies and even jeopardize their solvency, IMF economists write in a blog that draws on a chapter of the Global Financial Stability Report.
The size of these extreme losses has more than quadrupled since 2017, to $2.5 billion. And indirect losses like reputational damage or security upgrades are substantially higher.
“With the global financial system facing significant and growing cyber risks from increasing digitalization and geopolitical tensions…policies and governance frameworks at firms must keep pace,” the authors say.
“Financial firms should develop, and test, response and recovery procedures and national authorities should have effective response protocols and crisis management frameworks in place.”
?? Watch the IMF’s Fabio Natalucci and Felix Suntheim discuss increasing cyber threats at the Institute of International Finance.
Emerging Markets Are Exercising Greater Global Sway
The global economy is increasingly influenced by the Group of Twenty’s large emerging markets. Since China’s accession to the World Trade Organization in 2001, G20 emerging markets have doubled their share of world trade and foreign direct investment and now account for one third of global GDP.
In a blog based on a chapter of the World Economic Outlook, IMF economists say that growth “spillovers” from domestic shocks in G20 emerging markets have increased and are now comparable to those from advanced economies. A decline in productivity in G20 emerging markets could lower global output three times more than would have been the case in 2000, they say.
“At a time when growth prospects are weakening in China and several other large emerging markets, it is critical for policymakers…to understand the channels through which a slowdown could propagate through the global economy.”
?? Watch the IMF’s Andrea Presbitero and Andres Fernandez discuss emerging-market "spillovers" with Brad Setser of the Council on Foreign Relations.
Housing is One Reason Not All Countries Feel Same Pinch of Higher Interest Rates
Central banks have raised interest rates sharply over the past two years to combat inflation, yet the world economy has defied predictions of a serious slowdown, with global growth remaining broadly steady in most countries.
Why are some feeling the pinch from higher rates and not others? In a blog based on a chapter of the World Economic Outlook, IMF economists say that the answer lies partly in differences in mortgage and housing markets.
Monetary policy has greater effects in countries where the share of fixed-rate mortgages is low, because homeowners see their monthly payments rise in line with monetary policy, the authors say.
“By contrast, households with fixed-rate mortgages will not see any immediate difference in their monthly payments when policy rates change.”
The authors say the likelihood that households will feel the pinch will increase over time the longer central banks keep interest rates high.
?? Listen to the IMF’s Rui Mano talk to Tim Phillips of VoxTalks Economics about how the housing channels of monetary policy help to squeeze out inflation.
领英推荐
Fast-Growing $2 Trillion Private Credit Market Warrants Closer Watch
The private credit market emerged about three decades ago as a financing source for companies too large or risky for commercial banks and too small to raise debt in public markets. It has grown rapidly, topping $2.1 trillion globally last year.
In a blog based on a chapter in the Global Financial Stability Report, IMF economists say that private corporate credit has created significant economic benefits by providing long-term financing to corporate borrowers.
However, they warn that the migration of this lending from regulated banks and more transparent public markets to the more opaque world of private credit creates potential risks.
“Valuation is infrequent, credit quality isn’t always clear or easy to assess, and it’s hard to understand how systemic risks may be building given the less than clear interconnections between private credit funds, private equity firms, commercial banks, and investors.”
?? Watch the IMF’s Fabio Natalucci discuss the opaque world of private credit at the NYU Stern School of Business
NEXT WEEK'S HIGHLIGHTS
TUESDAY, APRIL 16
9:00 AM - 9:45 AM ET
10:15 AM - 11:00 AM ET
2:00 PM - 2:45 PM ET
WEDNESDAY, APRIL 17
9:00 AM - 9:45 AM ET
10:30 AM - 11:15 AM ET
11:30 AM - 12:30 PM ET
THURSDAY, APRIL 18
8:00 AM - 8:45 AM ET
9:00 AM - 9:30 AM ET
10:15 AM - 11:00 AM ET
11:30 AM - 12:15 PM ET
2:15 PM - 3:15 PM ET
FRIDAY, APRIL 19
8:30 AM - 9:15 AM ET
10:00 AM - 10:40 AM ET
11:30 AM - 12:00 PM ET
12:30 PM - 1:30 PM ET
2:00 PM - 2:24 PM ET
SATURDAY, APRIL 20
11:00 AM - 12:15 AM ET
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VIRTUAL NEWSSTAND
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