IMF update

The latest IMF analysis of global economics, finance, development and policy issues shaping the world.

Dear maria, In today's edition we focus on the IMF's regional economic outlooks, how countries can protect the poor as they repair public finances, the economic gains from universal basic skills, capital flows, labor markets, generation COVID, global taxation, Sri Lanka, gender gaps at financial institutions, and much more. Regional Outlooks Ukraine War's Regional Impact (PHOTO: RUSLAN LYTVYN/ISTOCK BY GETTY IMAGES) The war in Ukraine will have the greatest economic impact on Europe, where some 5 million refugees have already fled the fighting in the largest exodus the continent has seen since the Second World War. But Russia’s invasion is reverberating around the world, as shown by the IMF’s latest regional economic outlooks. The war is a serious setback to Europe’s economic recovery and is a reminder that the region must do more to improve energy security, Alfred Kammer, the director of the IMF’s European Department, writes in a blog. Ukraine and Russia will see the sharpest falls in output, but there is a risk several major economies, such as France, Germany, Italy, and the United Kingdom, could also sink into recession this year. --Sub-Saharan Africa: The shocks from the war could not have come at a worse time for sub-Saharan African countries that were starting to recover from the pandemic and where policymakers were beginning to address social and economic scarring from COVID-19, write Abebe Aemro Selassie and Peter Kovacs. The war and higher commodity prices will add to macroeconomic imbalances, erode living standards and heighten food insecurity, they say. --Middle East: In the Middle East and North Africa, the war and its impact on global commodity prices is exacerbating a growth divergence between the region’s oil exporters and importers. Prospects for oil exporters have improved as a result of the soaring price of crude, but growth prospects for the region’s commodity-importing countries have worsened, according to the Regional Economic Outlook. --Asia: Russia’s invasion will weigh on economic growth in Asia and the Pacific, with the region’s advanced economies hurt most by reduced demand from Europe and emerging markets feeling the effects of higher global commodity prices, according to a blog by Anne-Marie Gulde-Wolf, Sanjaya Panth, and Shanaka J. Peiris of the IMF’s Asia Department. For policymakers, this will exacerbate the policy trade-off between supporting recovery and containing inflation and debt. --Latin America: Policymakers in Latin America are reacting to the challenge by tightening monetary policy and implementing measures to soften the impact of higher inflation on the most vulnerable, write the IMF Western Hemisphere Department’s Santiago Acosta-Ormaechea, Ilan Goldfajn and Jorge Roldos. Higher financing costs could accelerate capital outflows and pose a challenge for countries in the region with large financing needs and limited resources to finance investment, they add. Find all the IMF's regional economic outlooks with our latest projection tables as well as related blogs, press briefings and videos here.   Watch Jihad Azour of the IMF’s Middle East and Central Asia Department speak to CNBC's Hadley Gamble about the war’s impact on the region and read an interview in which he calls on policymakers to take decisive action.   Listen to a podcast in which Papa N’Diaye of the IMF's African Department says shocks from the war are hitting the region at a time when countries’ ability to respond is minimal to nonexistent.   Inequality Protecting the Poor As policymakers begin to replenish pandemic-depleted fiscal coffers, it is critical to ensure continued support for poor households who have been most affected by the recent rise in food and energy prices, IMF Deputy Managing Director Antoinette Sayeh said at a Harvard discussion of inequality on Thursday. She noted that, in the long run, countries need to address the underlying drivers of inequality. For instance, policymakers must consider not only re-distribution policies such as progressive income tax and social assistance to correct inequalities but also pre-distribution policies that level the playing field before people enter the labor market, for example via public education, health and basic infrastructure. She also emphasized the role of gender‑inclusive policies in reducing inequality, as well as how unlocking the potential of green and digital economies can spread the benefits more widely. Read her opening remarks here. F&D Basic Skills Gap (PHOTO: LIORPT FROM GETTY IMAGES) The pandemic uncovered education inequalities, but basic skills gaps are a longstanding challenge. In an F&D article, published online this week, Stanford's Eric A. Hanushek and Ludger Woessmann of the University of Munich provide a comprehensive and timely analysis of global skills gaps.  They write: "Economic development depends on the skills of each society, which means that high-quality, equitable education is paramount. On this score, it is hard to be optimistic, because the deficits are large, and recent events have not improved the chances for success." The economic gains from achieving universal basic skills would also be immense, the authors say, as "the present value of added world GDP that would accrue over the remainder of the century is $700 trillion, or five times current annual world GDP."  "The key to improvement is an unwavering focus on the policy goal: improving student achievement," they conclude. Read the full article     Check out our March Issue of Finance & Development, which focuses on "Rethinking Fiscal: Public Finance and Fairness in a Changed World".   Want to get a print copy delivered to your home or office? Click here to subscribe.   (PHOTO: IMF)   Capital Flows Countries should not use measures to control capital flow to counteract fiscal policies that are unsustainable or to influence exchange rates for competitive advantage, Gita Gopinath, the IMF’s First Deputy Managing Director, said on Tuesday. Gopinath was speaking about the IMF’s new institutional view on capital flows at the Peterson Institute alongside economist Olivier Blanchard. Watch the video. (PHOTO: IMF)   Generation COVID A Spring Meetings seminar, the COVID Generation: Offsetting Lost Opportunities for Youth, looked at actions to offset the economic impact of the pandemic and the war in Ukraine on youth. “It is the great aspirations and ideas of young people, like you, that give us hope that we will move forward and make our world better for all,” said IMF Deputy Managing Director, Bo Li. Watch the discussion with IMF Youth Fellows and read the summary. (PHOTO: IMF)   Inclusive Labor Markets Panelists at the Spring meetings seminar, Labor Market Slack in Advanced European Economies and North America, called for labor markets to be more inclusive by bringing in disadvantaged groups of workers. “We do need reallocation of workers across sectors, particularly toward the renewable energy sector to favor the energy transition of economies,” said Tito Boeri of Bocconi University. Watch the discussion and read the summary. (PHOTO: IMF)   Essential Reading: Back to Basics Check out our e-Library section on F&D’s Back to Basics series, which explains fundamental economic concepts for a general audience. More than 70 articles and videos focus on relevant topics making the headlines and provide a better understanding of how economic issues can affect our daily lives.   The war in Ukraine will quicken inflation, which will remain elevated for longer than previously forecast, as shown in our latest Chart of the Week by Jorge Alvarez and Philip Barrett of the IMF's Research Department. Russia’s invasion of its neighbor is likely to have a protracted impact on commodities, affecting oil and gas prices more severely this year and food prices well into next year. WEEKLY ROUND-UP 01. Sri Lanka IMF Managing Director Kristalina Georgieva and other members of management met with a Sri Lankan delegation led by Finance Minister Ali Sabry and Central Bank Governor Nandalal Weerasinghe during the Spring Meetings in Washington to discuss policy actions to address economic challenges. A statement released on Saturday said: “The IMF team will support Sri Lanka’s efforts to overcome the current economic crisis by working closely with the authorities on their economic program, and by engaging with all other stakeholders in support of a timely resolution of the crisis.” 02. Shock Protection How can countries build resilience to economic and financial shocks?, asked the IMF’s chief economist, Pierre-Olivier Gourinchas, at the start of a fiscal forum on Sunday, also featuring Sierra Leone’s health minister Austin Demby, Chile’s former finance minister Rodrigo Cerda, the World Bank's Mamta Murthi, and Princeton University’s Markus Brunnermeier. Watch the panelists discuss  options for enhancing social safety nets and health care systems to protect the most vulnerable. 03. Global Taxation Policymakers and tax experts including the director of the IMF’s Fiscal Affairs Department Vitor Gaspar discussed an OECD-led framework on profit-shifting at a conference on a minimum global tax organized by the Fund and World Bank on Tuesday. The framework is seen as crucial to addressing the tax challenges arising from the digitalization and globalization of the economy. 04. Gender Balance in Financial Sector The IMF’s Antoinette Sayeh spoke of the need to close gender gaps and prevent gender inequalities from worsening at the launch of the 9th Edition of the Gender Balance Index Report on Thursday. In her opening remarks, she highlighted the Fund's continuing work in this area with the International Finance Corporation and Official Monetary and Financial Institutions Forum. 05. Capacity Development Since the start of the pandemic, the IMF has leveraged technology and created hybrid models to deliver capacity development to 178 member countries through more than 4,000 remote engagements to help mitigate the economic impact of the crisis and support recovery, Gita Gopinath said on Thursday. Speaking at a Capacity Development Dialogue, Gopinath said the IMF is expanding its transformational frameworks to help countries tackle longer-term challenges such as climate change and green growth, including in fragile and small island states. Read her full remarks. MARK YOUR CALENDAR Digital Technologies and Digital Money The IMF and Singapore Regional Training Institute will organize a series of events over the next two years focusing on digital money and technology using cases from Asia and the Pacific. The series launches in May with an event on Private Payment Systems and the Case of India. Future seminars will focus on case studies from other countries across Asia. Nick Owen Editor IMF Weekend Read nowen@imf.org