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Dear maria, Welcome to the Weekend Read! In today's edition we explore, among other things, why in some countries there are a lot of jobs but not enough workers, more detail on a new IMF trust fund, how the IMF is adapting to new challenges, what makes for a happy society, how economists can use strategic foresight, and the outlook for fragile and conflict-affected economies. **We want your input on the issues and trends economists and policymakers should be watching in 2022. Feel free to drop us a note.** Labor (Photo: Richard B. Levine/Newscom) Solving the Jobs Mystery In some countries, jobs are plentiful yet workers are scarce. A new blog by the IMF's Carlo Pizzinelli and Ippei Shibata explains why this phenomenon is playing based on data from the United States and United Kingdom. What their research found is that older workers leaving the workforce, the difficulty mothers of young children are facing with childcare and school interruptions, and a mismatch between the jobs available and those that people want are driving the trend. What's not having a major contribution is generous income support programs in response to the pandemic. --Why it's important: This employment gap, if it is persistent or widens further, could have major implications for growth, inequality, and inflation. A continued sluggish employment recovery amid sustained labor demand could constrain economic growth while fueling wage increases. While higher wages would be good news for workers, they could further fuel inflation. One common thread is that job vacancies and voluntary quits in the US and UK are highest among so-called low-skill occupations. While it remains to be seen how widespread and persistent this phenomenon will be, these facts hint at a possible change in worker preferences triggered by the pandemic. --Calling it Quits: The leading contributor to the employment gap in both the US and UK, accounting for around 35 percent of the outstanding employment gap versus pre-pandemic levels, is older workers leaving the labor market. It’s unclear how many of those who retired or quit may eventually return to work. Resilience and Sustainability (Image: Rose Kouwenhoven/IMF) A New IMF Trust Fund The IMF's Ceyla Pazarbasioglu and Uma Ramakrishnan laid out in a new blog this week how a proposed IMF Resilience and Sustainability Trust (RST) will help low-income and vulnerable middle-income countries build resilience to balance of payment shocks and ensure a sustainable recovery. The $50-billion trust fund would also be a place where countries could channel their Special Drawing Rights to more vulnerable nations. --Key design features: About three quarters of the IMF's membership would be eligible for RST financing. This would include all low-income countries, all developing and vulnerable small states, and all middle-income countries with gross national per-capita income of less than roughly $12,000 per year. The RST aims to address macro-critical longer-term structural challenges that entail significant macroeconomic risks to member countries’ resilience and sustainability, including climate change, pandemic preparedness, and digitalization. Access to RST financing would be determined case by case, based on the strength of reforms and debt sustainability considerations, and is expected to be capped at 150 percent of IMF quota or SDR 1 billion, whichever is smaller.  --Timeline: Pazarbasioglu and Ramakrishnan said they hope for broad support from IMF membership and international partners. The aim is to secure IMF Executive Board approval before the upcoming Spring Meetings and for the trust to become fully operational before the year’s end. Global Challenges (Image: Rose Kouwenhoven/IMF) The IMF Meeting Global Challenges From COVID-19 and climate change to digitalization and diverging demographics, the IMF’s member countries are confronting new challenges. In a new blog, the IMF's Sanjaya Panth and Ceyla Pazarbasioglu explain how the Fund is revisiting its policy advice, lending activities and capacity building to meet the evolving needs of its membership. The IMF's financing tools have modernized over time. To help countries address short-to-medium-term challenges emerging from the pandemic and beyond, the Fund will continue to deploy its traditional toolkit of surveillance, lending and capacity building, though minor modifications may sometimes be necessary.  Increased surveillance and lending focus on longer-term issues is also critical at the current juncture. Deep-seated structural issues are becoming much more prevalent in today’s world; they should be addressed now to prevent larger and more painful balance of payments problems in the future, the authors write. F&D (Photo: Sofia Busk/IMF) A Life Well Lived Denmark, Costa Rica and New Zealand stand out as three countries that are getting something right when it comes to maintaining the health and happiness of their citizens. In an article in our latest issue of Finance & Development, we look at what sets these countries apart in terms of effectively delivering services at the community level, cultivating social trust, and accounting for well-being at the highest policy level. Living amid the despair caused by a global pandemic has taught us that happiness, as we know it in its many forms, is important for the functioning of societies. Read the entire article. Check out our December Issue of Finance & Development.  Want to get a print copy delivered to your home or office? Click here to subscribe.     World Economic Outlook The IMF will release its update to the World Economic Outlook on Jan. 25 at 9 a.m. ET. The release will be accompanied by a press conference with the IMF's Gita Gopinath, Petya Koeva Brooks and Malhar Nabar.    (Photo: IMF)   IMF Market Insights Digitalization is changing our understanding of what “money” is and how it operates. Join the IMF’s Tobias Adrian at the 2022 MyFintech Week where you’ll hear more from him on central bank digital currencies. Sign up for the IMF's Market Insights, the IMF’s platform for analysis on global financial markets and related work    (Photo: IMF)   Essential Reading: Risk Management Check out our eLibrary section on risk management, where you can find all the latest IMF research on issues related to cybersecurity, finance and business, insurance, and risk modeling. Quote of the Week "Mitigating economic risks from long-term structural challenges requires a consistent and deliberate approach, with strong commitment from policymakers to undertake sometimes difficult reforms." —The IMF's Ceyla Pazarbasioglu and Uma Ramakrishnan in a blog on the proposed new Resilience and Sustainability Trust. WEEKLY ROUND-UP 01. Global Economic Outlook IMF Managing Director Kristalina Georgieva on Friday discussed the impact of the ongoing pandemic, rising debt levels, inflation and other issues during a World Economic Forum panel discussion on the global economic outlook. She stressed that in 2022, policymakers’ new year’s resolution should be "flexibility" as they face a tough obstacle course over the coming year. Watch the event with Christine Lagarde, Haruhiko Kuroda, Sri Mulyani Indrawati, and Paulo Guedes. 02. The Global Recovery in 2022 The IMF's Ceyla Pazarbasioglu this week discussed the global recovery amid diminished policy support, new COVID variants, continuing supply chain disruptions, increasing inflation, and rising debt burdens in many countries. The event hosted by the Center for Global Development also featured Ayhan Kose, Hanan Morsy, and Liliana Rojas-Suarez. 03. Strategic Foresight for Economists Strategic foresight (SF) is the systematic exploration of multiple plausible futures to inform present decisions. The IMF’s Alberto Behar and Sandile Hlatshwayo have published a note on why SF should be part of the economist’s toolkit and document the IMF’s experience with the methodology. Foresight is especially valuable when traditional risk analysis and model-based forecasting approaches have their limits (e.g., contexts with elevated uncertainty or structural breaks) and includes a range of complementary tools. At the IMF, foresight has palpably influenced strategy and operations (e.g., the Comprehensive Surveillance Review, creation of the Catastrophe Containment and Relief Trust, and responding to the COVID-19 crisis). It has also informed broader institutional contingency planning and crisis response preparedness in the current environment of heightened economic uncertainty. Fragile and conflict-affected states already confronted some of the greatest challenges among the world’s economies even before the pandemic. Our latest Chart of the Week from the IMF's Franck Bousquet illustrates how the pandemic exacerbated income divergence between these economies and the rest of the world. Per capita incomes in fragile states won’t recover to near their 2019 levels until 2024, IMF projections show. While each is different, fragile states typically have reduced institutional capacity and provide limited services for the population. They’re also characterized by limited ability to manage or mitigate social, economic, political, security or environmental risks. Conflict-affected states have active armed violence leading to civilian or military deaths. Adam Behsudi Editor IMF Weekend Read abehsudi@IMF.org   P.S. Be sure to let us know what issues and trends we should have on our radar as we launch into 2022. The divergence between these countries and the rest of the world is at risk of widening. Dear maria, We just published a new blog—please find the full text below. Fragile and Conflict-Affected Economies Are Falling Further Behind (Image: ERHUI/iStock by Getty Images) By Franck Bousquet Even before the pandemic, fragile and conflict-affected states (FCS) already confronted some of the greatest challenges among the world’s economies. While not all FCS face active conflict, most are at risk: global levels of violence are at a 30-year high and more than 80 million people had been forcefully displaced prior to the discovery of the coronavirus. Now, the continuing pandemic poses a significant risk that the divergence between these countries and the rest of the world will widen—and persist. The chart of the week illustrates how the pandemic exacerbated income divergence between these economies and the rest of the world. Per capita incomes in fragile states won’t recover to near their 2019 levels until 2024, IMF projections show; and by then, the gap with pre-crisis per capita income trends is set to remain larger for FCS than for other countries. These dimming prospects may be difficult to reverse because fragility and conflict interact with—and are often exacerbated by—global trends such as climate change, soaring food prices and gender inequality. The IMF classifies more than 40 economies as fragile and conflict-affected. Examples include Libya, Yemen, Chad, Democratic Republic of Congo, Somalia, Haiti and Papua New Guinea. Fragile states are already home to nearly 1 billion people and are on course to be home to 60 percent of the world’s poor by 2030 . While each is different, fragile states typically have reduced institutional capacity and provide limited services for the population. They’re also characterized by limited ability to manage or mitigate social, economic, political, security or environmental risks. Conflict-affected states have active armed violence leading to civilian or military deaths. In these vulnerable economies, slower recovery has followed an especially hard hit from the pandemic. Their per capita gross domestic product contracted 7.5 percent last year amid increased political tensions, limited policy options to respond to the pandemic, lockdown and other steps to contain the virus, and volatile oil prices. In addition, debt and inflation pressures are mounting. Compared to pre-pandemic projections, public debt rose by 17 percentage points to 78 percent of gross domestic product in 2020, IMF research shows. Fragile states also saw consumer prices surge 9 percentage points above their pre-pandemic projections. Food inflation particularly exacerbates food security challenges and is reversing past progress. Global food prices rose 23.1 percent last year, according to the United Nations Food and Agriculture Organization. Together, these challenges underscore how fragile states risk falling even further behind the rest of the world—and why supporting them, more than ever, must be an international priority. ******   We Want To Hear From You! Click here for a 3-question survey on IMFBlog. Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org   Thank you again for your interest in IMF Blog. Read more of our latest content here. Take good care!