IMF update

 

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

Dear maria, In today's edition, we discuss how fairer taxes could aid growth and ease inequality in the Middle East and Central Asia, what history can teach us about turbulent times, Portugal's economic recovery, Central America's growth opportunities, green jobs in the United States, the pandemic's uneven impact in Europe, and much more. Middle East and Central Asia Fairer Taxes to Aid Growth, Ease Inequality Why Countries Must Cooperate on Carbon Prices (PHOTO: ANDREI VASILEV/ISTOCK BY GETTY IMAGES) Countries in the Middle East and Central Asia have a long history of using taxes to develop their economies and promote social inclusion. The first income tax can be traced back 5,000 years to Ancient Egypt. The Pharaohs used it to build granaries and feed the poor during shortages. Zakat, a payment obligation akin to a progressive tax that began in the 12th century, is still collected to fund social spending in Saudi Arabia and elsewhere. In a new blog, Jihad Azour, Priscilla Muthoora and Geneviève Verdier say that tax systems have evolved significantly over the centuries, but tax revenue as a share of GDP remains relatively low. Governments, meanwhile, face immediate pressure to increase spending to protect the poor from inflation, improve health and education, build resilience to future shocks, and meet the United Nations Sustainable Development Goals. Pointing to the findings of an IMF staff paper published this week, the authors say there is a large gap between actual and potential tax collection in the region. Lasting improvements could be made to mobilize greater revenue. This would promote economic development, increase social inclusion and alleviate food insecurity, continuing a path charted by the Pharaohs. Watch a video of the IMF's First Deputy Managing Director Gita Gopinath and other panelists discuss the findings of the paper at a launch event.   F&D Turbulence and the Lessons of History (PHOTO: GETTY/BETTMANN) Events of recent years, and most recently the COVID-19 pandemic and the war in Ukraine, have forced all of us to confront some of the hazards inherent in our interconnected world, writes Oxford historian Patricia Clavin in the June issue of Finance and Development Magazine. In the 21st century, the gravest threat to international stability appears to lie in our societies’ greater interdependence, reinforcing the power of a shock from anywhere in the world to become systemic, Clavin continues. “Turbulence can push individuals, institutions, and states to their limits. History shows that it simultaneously fosters creative, pluralistic, and dynamic advocacy that leads to new modes of cooperation, often in history’s darkest hours.” Read the full article and listen to the podcast   F&D June Issue Our June issue focuses on the economic dimensions of the current geopolitical situation, including the war in Ukraine, refugees, and food prices. Authors include Tharman Shanmugaratnum, Pierre-Olivier Gourinchas, Eswar Prasad, Raj Chetty, Barry Eichengreen, Patricia Clavin, and many others, who examine the rare confluence of geopolitical, economic, and technological forces now confronting the world may reverberate for generations.  NEW: F&D is now also available in HTML format in languages other than English: Arabic, Japanese, Russian, and Spanish. Chinese and French versions are coming soon. Want to get a print copy delivered to your home or office? Click here to subscribe. (PHOTO: JOYT/ISTOCK)   Portugal's Recovery Portugal’s economy has recovered from a deep pandemic-induced recession. Now policymakers face new challenges, including protecting the poor from the fastest inflation for over a decade. In a Country Focus article, the IMF’s Portugal team says that policymakers must balance short- and medium-term priorities for lasting economic growth and resilience. With the right policies, Portugal could become a more competitive, greener economy that can make the most of digital opportunities. (PHOTO: SORINCOLAC/ISTOCK)   Growth in Central America Central America is no stranger to shocks. The region was once one of the most volatile in the world, the scene of civil and political upheaval, and lately it has been hit by a series of natural disasters. Amid current economic challenges, policymakers have a unique opportunity to steer the region’s economies onto a path of more resilient and inclusive growth, the IMF’s Metodij Hadzi-Vaskov and Joyce Wong write in a Country Focus article.   Geoeconomic Fragmentation Economists have recently been sounding the alarm about the risks of fragmentation, but what exactly does it mean? In the latest instalment of our Analyze This! series, IMF chief economist Pierre-Olivier Gourinchas explains what fragmentation is and why it’s an issue.   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. WEEKLY ROUND-UP 01. Green Jobs in United States A transformation of the global economy is needed to tackle climate change and workers must shift from employment in carbon-intensive industries to those that produce less greenhouse gases. In a staff paper, the IMF’s Katharina Bergant, Rui Mano and Ippei Shibata examine green and polluting jobs in the United States across labor markets, industries and households. Transitioning out of pollution-intensive jobs poses some challenges, but there is a wage premium for green-intensive jobs, the authors say. They reckon this should encourage the transition. Read more about how the right labor-market policies can ease the transition to green jobs in this blog. 02. Pandemic's Uneven Impact in Europe The COVID-19 pandemic had an uneven impact across Europe. While the worst-hit economies contracted by more than 10 percent, a few countries managed to escape recession in 2020. The IMF’s Anil Ari, Jean-Marc B. Atsebi and Mar Domenech Palacios explain why in a staff paper. The authors conclude that declines in mobility—the extent to which people move about—had the greatest impact on economic activity. Policy support played an important role in lessening the economic impact of the pandemic, they add. 03. Climate Change and Catastrophe Bonds Financial markets will play a pivotal role in financing adaptation and mitigation to climate change. In a Staff Climate Note, the IMF’s Ando Sakai, Francisco Roch, Ursula Wiriadinata and Chenxu Fu discuss the benefits of issuing “catastrophe bonds” and other financial instruments. These instruments could, the authors say, provide additional financing with more favorable market access conditions, mitigate the stress of climate risks on public finances, and facilitate the transition to greener low-carbon economies. 04. Digital Money and Central Banks Central bank digital currencies, stablecoins and other innovations in digital money pose challenges for monetary authorities. In a staff paper published earlier this year, the IMF’s Charles Kahn, Manmohan Singh and Jihad Alwazir highlight the need for new central bank objectives before the introduction of new digital money, and why traditional concepts such as seigniorage and base money will need to integrate with faster transactions, especially in emerging market and low-income countries. 05. Vietnam's Recovery Vietnam’s economy contracted sharply following a severe outbreak of COVID-19 in April last year, but a remarkably successful vaccination rollout has paved the way to a strategy of living with the virus, the IMF's Executive Board said in a statement on Tuesday.  After growth of 2.6 percent in 2021, Vietnam’s economy is expected to expand by 6 percent in 2022 and 7.2 percent in 2023. “Prudent policies resulted in a prolonged period of high growth, price stability, and low public debt ratios," the statement, released after an annual Article IV consultation, said. "Strong FDI and trade flows boosted external buffers.” Nick Owen Editor IMF Weekend Read nowen@IMF.org   Thank you again very much for your interest in the Weekend Read! Be sure to let us know what issues and trends we should have on our radar.

Historian Patricia Clavin says we may see the re-emergence of regional power blocks, which harkens back to the 1930s.

Patricia Clavin on Turbulence and Lessons from History July 7, 2022 (Photo: University of Oxford) Albert Einstein once said, "In the midst of every crisis, lies great opportunity." But while the war in Ukraine has sparked crises on several fronts, the opportunities are not all that obvious at this point. Historians can help connect those lines by looking back at how we emerged from history's darkest hours. In this podcast, journalist Rhoda Metcalfe asks Clavin what the geopolitical fallout from the war might mean for globalization. Patricia Clavin is Professor of Modern History at Oxford University and a Worcester College fellow. Read the article in F&D Listen to the podcast Read the transcript   ***** Thanks for listening to the podcast. We're always looking to improve your experience so let us know if you have any suggestions! Send your comments to me at bedwards2@imf.org.   Bruce Edwards Producer, IMF Podcasts