IMF SPRING MEETINGS

 

Dear maria, welcome to a special edition of the Weekend Read In this special edition from the Spring Meetings, we spotlight the IMF managing director’s global policy priorities, the threats to the world economy from geopolitics and protectionism, the International Monetary and Financial Committee, economic outlooks for all the world’s regions, and more. The Weekend Read will return next Friday, when we will report on must-watch sessions covering central banks’ battle with inflation and the benefits of digital infrastructure.

Managing Director Sets Out Policy Agenda The global economy is at another highly uncertain moment, as tentative signs of stabilization earlier this year have receded and the outlook is increasingly risky, IMF Managing Director Kristalina Georgieva said in her Global Policy Agenda. At the same time, divisions within and across countries are deepening, exacerbated by rising fragmentation. Strong policy action is needed together with pragmatic approaches to find areas of common ground to respond to shared challenges. The IMF is proactively engaging with members to chart a clear course to a stronger and more sustainable path for the global economy, she added. “The world economy has proven remarkably resilient to the multiple shocks of the last three years, but it is yet to overcome the combination of weak growth and sticky inflation,” Georgieva told a press conference. Common priorities include restoring price stability and safeguarding financial stability, advancing structural transformations and countering fragmentation, and showing solidarity with the most vulnerable countries. “I am making a double plea on their behalf: help them resolve crushing debt burdens and help ensure that the IMF can continue to support them going forward.” READ THE REPORT

International Cooperation Essential For Stronger Global Growth and Stability The worst macroeconomic outcomes contemplated six months ago have not come to pass, but international cooperation and strengthened multilateralism are essential to boost global growth and protect stability, Nadia Calviño, the chair of the International Monetary and Financial Committee, said in a statement after the first of the body’s twice-yearly meetings. The past week has seen progress on issues that matter to the world’s most vulnerable countries, including the Global Sovereign Debt Roundtable as well as contributions to the Poverty Reduction Growth Trust and the Resilience and Sustainability Trust, which will reinforce the global financial safety net, Calviño told a press briefing. “These meetings conclude with an enhanced commitment by members to coordinate our economic policies, to reinforce our global financial safety net and to work together in a constructive manner to deliver on our shared roadmap as we start the road to Marrakech.” READ THE STATMENT

Geopolitics and Protectionism Cloud Economic Outlook Speakers at a debate on the global economy on Thursday broadly agreed that the world would be in better shape in a year’s time, but worried about the risks from geopolitical fragmentation. IMF Managing Director Kristalina Georgieva said the world economy had proved resilient in the face of repeated shocks, but the Fund’s projection of 3 percent growth over next five years was too low to provide people with opportunities and core inflation was still too high. Geopolitical tensions threatened global growth and there had to be a rational debate about how to protect national security and preserve economic prosperity, she added. “Fragmentation in the world economy is a drag on growth.” Finance professor Raghuram Rajan said security considerations were becoming a “front for protectionism of all kinds” and the greatest contribution the United States could make to global development would be to limit fragmentation to strategic areas. Nadia Fettah, Morocco’s finance minister, told the audience that fragmentation was a concern for countries like hers that support international cooperation but suffer from problems created from afar. “Fragmentation is a risk for the economies of Africa and emerging markets that are the engines of growth.” Poland’s Prime Minister Mateusz Morawiecki said Russia’s invasion of Ukraine and other geopolitical ructions called for a rethink of established economic models and production chains. He celebrated his country’s independence from Russian fossil fuels for the first time in its history and said countries in Central and Eastern Europe could benefit from “friend-shoring”. “It would be good for Europe if we realize the real challenge nowadays apart from the war is reestablishing production chains on a different footing than they used to be.” WATCH THE DEBATE

NUMBER OF THE DAY IMF concessional financing has increased more than four-fold since the onset of Covid. The IMF has called for $4.7 billion in loan resources and $1.6 billion in additional subsidy resources to maintain interest-free support for the most vulnerable countries in the world.     4 X

Taming Inflation Expectations Crucial To Lowering Prices Canada’s central bank was among the first to raise interest rates coming out of the pandemic, increasing them by a total of 425 basis points since March 2022. Yet consumers still expect future price rises to exceed actual inflation, now running at about 5 percent. “Inflation expectations need to come down more if we’re going to get inflation down to target,” Bank of Canada chief Tiff Macklem said during a Governor Talk. One lesson central banks have learned is that communication makes it easier to anchor inflation expectations, Macklem told the acting director of the IMF’s Western Hemisphere Department, Nigel Chalk. “Monetary policy works better when everybody understands what we’re doing and…people can plan their budgets with confidence.” The central bank regularly releases growth and inflation projections and recently began to publish summaries of deliberations by the Governing Council, the policy-making body. “Being clear about our outlook, sharing deliberations, given speeches to update Canadians and markets on how we see developments minimize any misunderstanding.”

CHART OF THE DAY   China’s reopening will provide fresh momentum for economic growth in Asia and the Pacific, a region that will in turn contribute more than 70 percent of global growth this year. Ordinarily the strongest effect from China for the region would be from its demand for investment goods, but this time the biggest effect is from demand for consumption from the country.  READ THE BLOG

Regional Outlook: Asia and the Pacific

Asia is emerging as a pillar strength amid what is shaping up as an otherwise challenging year for the global economy, and China’s reopening will provide fresh momentum. That’s the latest view on the regional outlook from Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, during his briefing on Thursday.

The region will contribute more than 70 percent to global growth this year, though it still faces challenges from inflation, debt, and financial vulnerabilities, Srinivasan wrote in a blog post that accompanied the press conference. The department projects that growth in Asia will accelerate this year to 4.6 percent, a faster pace than forecast in October, largely because of China’s reopening. WATCH HERE

Regional Outlook: Europe

Europe has so far avoided a full-blown recession but faces a triple challenge of maintaining economic recovery, defeating inflation and safeguarding financial stability, according to Alfred Kammer, director of the IMF’s European Department.

At a press briefing, Kammer said that Europe’s advanced economies would grow by just 0.7 percent this year. For emerging economies (excluding Russia, Ukraine, Belarus and Türkiye), growth will decline to 1.1 percent. Kammer said central banks should maintain tight monetary policy until core inflation is on a clear path back to targets and governments should pursue more ambitious fiscal consolidation to fight inflation and replenish depleted fiscal reserves. WATCH HERE

Regional Outlook: Middle East and Central Asia

Growth in the Middle East and North Africa will slow to 3.1 percent this year amid tight macroeconomic policies, OPEC-plus production cuts and a recent deterioration in global financial conditions, Jihad Azour, the director of the IMF’s Middle East and Central Asia Department, told a press briefing. Growth in Central Asia and the Caucasus is also expected to slow, to 4.2 percent.

Azour discussed the impact of recent financial market instability on the region’s banks, stressing that spillovers have been limited. Monetary policy should focus on maintaining or regaining price stability, he said. WATCH HERE

Regional Outlook: Latin America and the Caribbean

Growth in Latin America and the Caribbean is likely to slow to 1.6 percent this year, even as high inflation continues to pose a cost-of-living crisis for the most vulnerable.  “We attach an important priority to quickly bringing inflation back to central banks’ target,” Nigel Chalk, the deputy director of the IMF’s Western Hemisphere Department, said at a press conference on the region’s economic outlook.

Fiscal policy should help monetary policy in reducing demand pressures to mitigate the risk that inflation becomes entrenched. Tax systems should be redesigned to raise revenues and ensure that the wealthy pay more, Chalk wrote in a blog that was published at the same time. WATCH HERE

Regional Outlook: Sub-Saharan Africa

People in sub-Saharan Africa are feeling the effects of a funding crisis, as access to cheaper financing is curtailed and borrowing and living costs increase, IMF African Department Director Abebe Aemro Selassie said at a press briefing on the region’s economic outlook.

“Coupled with a long-term decline in aid and a more recent fall in investment…this means that there is less money to be spent on vital services like health, education and infrastructure.” Growth in sub-Saharan Africa will decline to 3.6 percent this year, although there is significant variation across the region, Selassie said. WATCH HERE

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Dear maria, welcome to the April 13 briefing from the 2023 Spring Meetings In the third of our daily briefings from the Spring Meetings, we spotlight support for low-income countries, public debt and deficits, artificial intelligence, crypto’s pains and possibilities, Ukraine, public spending, and much more. FULL SCHEDULE

Kristalina Georgieva Calls For Support For Poorest Nations The IMF’s managing director on Wednesday called on the international community to support the world’s poorest countries by helping to close a funding gap facing the Poverty Reduction and Growth Trust, the Fund’s main instrument to support low-income countries with interest-free loans. Speaking at the start of a session on concessional finance, Kristalina Georgieva said that low-income countries had been impacted severely by multiple economic shocks in recent years and their per-capita income is expected to rise at the slowest pace since 1990, hindering their aspirations to catch up with richer economies. “This puts them in danger of further divergence unless we act,” she said. Since the start of the pandemic, the IMF has provided $24 billion in support through the PRGT, alleviating people’s suffering and preventing instability from spreading beyond borders. But higher international interest rates have raised the cost of borrowing and increased the funding shortfall. “We have to work together to close this gap and I have no doubt that we will be successful,” Georgieva said, adding that every dollar committed in PRGT subsidies translates into $5 of interest-free lending. READ THE MANAGING DIRECTOR'S REMARKS

NUMBER OF THE DAY Every dollar committed in subsidies to the IMF’s Poverty Reduction and Growth Trust translates into $5 of interest-free lending to the world’s poorest countries, Kristalina Georgieva told a session on concessional finance.   $1 = $5

Fiscal Policy Can Promote Economic Stability and Address Risks to Public Finances Following exceptional pandemic support, governments should foster disinflation and financial stability while protecting the most vulnerable and safeguarding public finances, according to the IMF’s latest Fiscal Monitor. Writing in a blog, Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, said that fiscal policy has moved a long way toward normalization since the pandemic. Governments have withdrawn exceptional fiscal support, and public debt and deficits are falling from record levels. That’s happening amid high inflation, rising borrowing costs, a weaker growth outlook, and elevated financial risks. Debt sustainability is a cause for concern in many countries. “Amid high inflation, tightening financing conditions, and elevated debt, policymakers should prioritize keeping fiscal policy consistent with central bank policies to promote price and financial stability,” Gaspar said. “Tighter fiscal policies require better targeted safety nets to protect the most vulnerable households, including addressing food insecurity, while containing overall spending growth, as governments are likely to confront social pressures to compensate for past increases in the cost of living.” At a press conference, Gaspar answered reporters’ questions on public debt, inflation, China, India and sub-Saharan Africa. READ THE REPORT

CHART OF THE DAY   Global debt has posted the steepest decline in 70 years and stood at 92 percent of GDP at the end of last year, as nearly three-quarters of countries tightened both fiscal and monetary policies. Primary deficits are also falling rapidly and approaching pre-pandemic levels. READ THE BLOG

How To Manage Rising Debt Distress Nearly 15 percent of low-income countries are in debt distress and 25 percent of emerging market economies are borrowing on extremely expensive terms, deepening global risks in a high-inflation, high-interest rate environment, the IMF’s First Deputy Managing Director Gita Gopinath told a Capacity Development seminar. Good policies and strong institutions are critical to avoid debt distress and IMF capacity development aims to equip countries with tools for better debt management and transparency. “You can’t talk about good financial management unless you have a good sense of exactly how much debt your countries have,” said Gopinath. Georgian finance minister Lasha Khutsishvili and Beninese finance and economy minister Romuald Wadagni described how these tools and fiscal reforms helped to reduce debt vulnerabilities in their countries. This included fiscal transparency, spending prioritization, and implementing a country debt strategy. “Markets will not be happy because you have the highest growth rate or the lowest budget deficit, but they will be very comfortable if they can predict what will be happening in your country,” said Wadagni.

UKRAINE MINISTERIAL ROUNDTABLE IMF proud to be part of international support

President Volodymyr Zelensky described the terrible toll of Russia’s invasion and his country’s large reconstruction needs at a ministerial roundtable, co-chaired by the Ukraine government, World Bank and IMF. “The faster and more effective the solutions are the more reliable and long-lasting peace after this war will be,” he said. IMF Managing Director Kristalina Georgieva highlighted a recently approved program under the Extended Fund Facility worth a total of $15.6 billion in her remarks. “With its actions, Ukraine has earned strong international support and the IMF is proud to be part of it.”

Banks Are Stronger Than In 2008, But Non-Bank Risks Should Not Be Overlooked Despite recent stress in the financial sector, the global banking system is not on the cusp of a major crisis, Bank of England governor Andrew Bailey said in a Governor Talk. Banks are in a much stronger position today than in 2007-08 and regulators have more weapons to fight off instability, Bailey told Alfred Kammer, director of the IMF’s European Department. “We’re in a very different place and I really don’t see this as the beginnings of a systemic financial crisis.” But Bailey said that authorities should learn from the speed at which depositors withdrew funds from Silicon Valley Bank, one of three US lenders to have collapsed since March, and stressed the importance of communication to reassure markets. It is not enough for central banks to simply tell people that everything is fine and they should not worry. “You have to say, ‘Here are the facts as we see them.’” Even as banks come under stress, authorities should not overlook risks coming from the non-bank sector, including crypto assets, money-market funds and open-ended funds, Bailey added. “It’s vital that we don’t let our agenda on non-banks become sidelined by some of the issues coming up in the banking world.”

The Future of Crypto Assets Crypto assets will boom again despite the sector’s near implosion last year when it lost around $2 trillion of value, panelists told a New Economy Forum. A new technology revolution is underway, powered by a growing class of young crypto natives who own these assets and believe that it is the future of finance, said Linda Jeng of the Crypto Council for Innovation. “We are heading into a world of programmable money.” Yet many of crypto’s issues are identical to those seen for decades. “We’re painfully relearning the same lessons we’ve learned in traditional finance—issues around old-fashioned types of risks,” such as inappropriate business models, liquidity and maturity mismatches, extensive leverage, and inadequate consumer and investor protection, said the Financial Stability Board’s Rupert Thorne. Should crypto be granted legal tender status? Panelists were sharply divided. Though these assets were created to disrupt establishment finance, central banks now seem to be co-opting them in the form of central bank digital currencies, said Gillian Tett of the Financial Times. It remains to be seen whether central banks will manage to outcompete their private sector rivals. “There’s room for both these sectors to continue to evolve as long as they are appropriately regulated,” Thorne said. The Group of Twenty is set to debate this issue in September.

Artificial Intelligence’s Winners and Losers At a New Economy Forum on artificial intelligence, people watched a thought-provoking video in which a ChatGPT-like AI generative tool described the progress it has made and the inevitable disruptions it will cause, resulting in both winners and losers. Anton Korinek of the Brookings Institution said policies should be put in place to address disruptions to labor markets and financial systems, but emphasized the exponential growth of generative AI and encouraged everyone to embrace it in their daily work. “Try your best to overcome the typical bureaucratic holdups in the rollout of new technologies. This is moving really fast and you need to and employ it as quickly as possible.” Yale’s Hélène Landemore stressed the importance of investing in flawed democratic systems to make them more inclusive and better able to cope with the challenges that AI poses. Murielle Popa-Fabre of the Council of Europe agreed there would be winners and losers. People should prioritize cognitive training and refine their human qualities to remain unpredictable and distinct from AI robots, she said.

Finance Ministries Face Mounting Pressures As multiple economic crises over the past few years have piled spending pressures on governments, a panel discussion focused on the importance of spending well and spending with accountability. IMF Deputy Managing Director Antoinette Sayeh said that governments across the world spent $17 trillion to lift their economies after the pandemic. This has put pressure on policymakers, as they try to maintain fiscal responsibility while supporting the most vulnerable people. Albania’s Delina Ibrahimaj added that finance ministers around the world have had to be “superheroes” over the past few years, as they grapple with the challenge of building buffers, while dealing with immediate and future crises. Nancy Gathungu, Kenya’s auditor-general, emphasized the importance of communications and simplifying the language around spending and audits. She also stressed that governments should engage citizens and make them part of the audit process.

TODAY'S HIGHLIGHTS

THURSDAY, APRIL 13

8:30 AM - 9:15 AM ET IMF Managing Director Press Briefing on the Global Policy Agenda 9:00 AM - 9:30 AM ET Governor Talks: Canada

9:45 AM - 10:30AM ET Press Briefing: Middle East and Central Asia Department 10:00 AM - 10:30 AM ET Capacity Development Talk: Strengthening Education and Health Spending Policies in Low-Income Countries 11:00 AM - 11:45 AM ET Press Briefing: Asia and Pacific Department 12:00 PM - 12:45 PM ET IMF Seminar: Young Entrepreneurs and the Digital Transformation in the Middle East and North Africa

2:00 PM - 2:45 PM ET IMF Seminar: Debate on the Global Economy 3:00 PM - 3:45 PM ET Press Briefing: Western Hemisphere Department

IMF TODAY IMF Today is a live daily broadcast, bringing you the main voices, headlines, and stories from the Spring Meetings. Join every day from Monday, April 10 to Friday, April 14 at 5:00 pm (Washington time)

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