IMF,WEEKEND READ

 

Dear maria, In today's edition, we focus on the recession risks facing the global economy, widening inequalities in sub-Saharan Africa, how international regulation could instill confidence in crypto, remittances in central America, equitable education and basic skills, OPEC's impact on oil prices, and much more.

Global Economy Recession Risks Why Countries Must Cooperate on Carbon Prices (IMAGE: BLOOMBERG) Central banks must continue to raise interest rates to rein in inflation even as it becomes harder to predict whether the global economy will slide into recession next year, the IMF’s Managing Director Kristalina Georgieva said on Wednesday. Speaking to Bloomberg’s Francine Lacqua on the sidelines of a United Nation’s General Assembly meeting in New York, Georgieva said that China’s growth is slowing and some European economies may be in recession already. “Whether we meet the technical definition of recession or not, I do expect that for hundreds of millions of people it will feel like recession.” Even so, Georgieva said price stability was of paramount importance. Without it, global growth would slow and those with the lowest incomes would suffer the most. “Inflation is a tax upon the poor.”  Watch the full interview, which also covers debt, emerging markets and climate change. The Managing Director also appeared on a New York Times climate panel. Watch here.   Sub-Saharan Africa Widening Inequalities (IMAGE: IMF) Sub-Saharan Arica’s inequalities widened during the pandemic, with the region’s least-resilient economies and lowest-skilled informal workers bearing the brunt, IMF Deputy Managing Director Antoinette Sayeh told a conference on Tuesday. Sub-Saharan Africa is also expected to rebound from the pandemic more slowly than the rest of the world, Sayeh said in a speech to the conference of African and Latin American nations. “Sustained inequality can also leave long-lasting scars and undermine economic, social and political stability.” Many economies in sub-Saharan Africa grew at a record pace before the pandemic. But, as the IMF’s Habtamu Fuje and Jiaxiong Yao write in a blog that analyses satellite images of the Earth’s nighttime lights, it is less clear whether the gains in economic growth have been shared equally across regions. Read all the material presented at the conference here, including perspectives from Brazil, Mozambique and Senegal.   F&D Regulating Crypto (CREDIT: ROGER BROWN/ PEXELS) Crypto assets have been around for more than a decade, but it’s only now that efforts to regulate them have moved to the top of the policy agenda, write the IMF’s Aditya Narain and Marina Moretti in F&D.  The regulatory fabric is being woven, and a pattern is expected to emerge. But the worry is that the longer this takes, the more national authorities will get locked into differing regulatory frameworks. “A global regulatory framework will bring order to the markets, help instill consumer confidence, lay out the limits of what is permissible, and provide a safe space for useful innovation to continue,” Narain and Moretti write. Read the full article   This article appears in the September 2022 edition of F&D Magazine—THE MONEY REVOLUTION: CRYPTO, CBDCs, AND THE FUTURE OF FINANCE. In this edition, F&D delves into Crypto and CBDCs by drawing on cutting-edge research and analysis from economists and other leading experts including Agustín Carstens, Eswar Prasad, Ravi Menon, Tobias Adrian and many others.

(CREDIT: PAPABEAR/ISTOCK BY GETTY IMAGES)   Jobs in the U.S. Employers with labor market power can attract a large pool of applicants without having to offer higher wages. In a blog, the IMF’s Anastasia Burya, Rui C. Mano, Yannick Timmer and Anke Weber write that such employers are more likely to fire workers as interest rates rise because they can more easily hire back when the Fed cuts rates again.

Rising Remittances Remittances from the United States to Central America and Mexico hit record levels in 2021, driven by rising U.S. wages and unemployment insurance relief, the IMF’s Yorbol Yakshilikov writes in a Country Focus article. Over time, remittances are expected to grow, as more people migrate to the U.S. and wages there continue to rise.

Basic Skills Gap Economic growth depends on several factors, but a new study by Eric Hanushek and Ludger Woessmann shows nothing is more important for development than equitable education. In a podcast, Stanford’s Hanushek says skill differences account for three-quarters of cross-country variations in long-term growth. Read the transcript.

Factsheets: Decision-Making Voting power and decision-making at the IMF reflect its member countries’ relative economic position. The IMF works to ensure that its governance structure keeps pace with changes in the world economy, including the larger role that emerging market and developing economies now have. Check out our latest factsheet to learn more.

The commercial real estate sector has been on the mend since the pandemic, but momentum may be slowing as central banks shift to hiking interest rates, as shown in the Chart of the Week by the IMF’s Andrea Deghi, Fabio Natalucci and Mahvash S. Qureshi. Property prices in the industrial and residential segments have experienced a deceleration across regions in recent months. At the same time, the depreciation in retail and office property prices has increased.

WEEKLY ROUND-UP 01. Argentina The IMF has reached staff-level agreement with the Argentine authorities on the second review under the country’s Extended Fund Facility. The agreement is subject to approval by the IMF’s Executive Board. Upon completion of the review, Argentina would have access to about $3.9 billion. “The review focused on assessing progress since completion of the first review, updating the macroeconomic framework and reaching understandings on a solid policy package to continue to strengthen macroeconomic stability and secure sustained and inclusive growth,” a statement said. 02. OPEC's Impact What impact does OPEC have on the price of oil? In a new working paper, the IMF’s Andrea Pescatori and Yousef F. Nazer identify the effects of announcements by the organization of oil-exporting countries on price fluctuations. Results show that price volatility is higher than typical around OPEC meetings. Members’ compliance—a proxy for credibility—has fluctuated strongly over time, the authors write. 03. Excess Profits Taxes on excess corporate profits have attracted renewed interest as governments grapple with the cost-of-living crisis. The IMF’s Shafik Hebous, Dinar Prihardini and Nate Vernon tell the history of these taxes from the first world war to today’s challenges as companies shift profits to low-tax countries. They estimate the revenues that governments could raise. “A case can be made for taxing excess or windfall profits to meet extraordinary financing needs,” the authors write in their working paper. 04. Pharma Spending Pharmaceuticals are an indispensable component of modern health systems and have led to longer life expectancy. But could countries get more value for money? “Our empirical analysis suggests that increasing the volume market share of generics in retail is associated with significant efficiency gains...and releases resources to be allocated either within the health sector or to other sectors,” writes the IMF’s Manuel García-Goñi in a working paper. 05. Fiscal Space Spending reviews are an important tool in public financial management. They help create fiscal space, which can be used to fund new priorities, address emerging spending pressures, or reduce debt. The IMF’s latest How-To Note explains how to design and institutionalize budget reviews. MARK YOUR CALENDAR 01. Governance Framework We are inviting civil society organizations to participate in an online consultation on the IMF’s review of the Framework for Enhanced Engagement on Governance. Last chance to share your views by September 28.

Nick Owen Editor IMF Weekend Read nowen@IMF.org