IMF update

 

Dear MARIA, In today's edition, we highlight: Kristalina Georgieva at ASEAN Gita Gopinath on emerging market outlook Africa's fragile states and climate change Latin America's resilience Money laundering

SOUTH EAST ASIA SUMMIT Managing Director Calls For Push Against Fragmentation (Credit: @KGeorgieva/X) IMF Managing Director Kristalina Georgieva on Tuesday called on South East Asian nations to “invest in international cooperation” by pushing back against the forces of fragmentation. Speaking at an annual ASEAN summit in the Indonesian capital Jakarta, Georgieva said that the 10-member bloc could be a powerful advocate for the benefits of cooperation and could count on the IMF as a partner in these efforts. According to IMF estimates, ASEAN countries contribute around 10 percent to global economic growth—double their weight in the world economy. But the region of highly integrated economies is experiencing significant scarring from supply-chain disruptions and subdued external demand arising from global shocks. ASEAN needs even stronger growth to fully recover and continue on the pre-pandemic path to prosperity and economic fragmentation makes this even harder, Georgieva told the summit. “If the world were to break into separate economic blocs, this would have profound implications for dynamic open economies such as ASEAN.” Read more about the role of international institutions in bringing countries together to solve common challenges in Kristalina Georgieva new essay for Foreign Affairs.

IMF-WORLD BANK STATEMENT Critical Role of Bretton Woods Institutions The Bretton Woods institutions have a critical role to play to help member countries address world challenges and leverage opportunities, the IMF Managing Director and World Bank President said in a joint statement on Thursday. “The world confronts major transformational challenges and more frequent shocks at a time of rising economic and geopolitical tensions,” Kristalina Georgieva and Ajay Banga said. “The challenges are too great for individual actors to address.” GLOBAL ECONOMY IMF's $650 Billion Liquidity Boost Continues to Benefit Global Economy (Credit: Oleksandr/Adobe Stock) The IMF’s largest-ever allocation of special drawing rights in August 2021 met its objectives by giving member countries a boost and helping the global economy avoid worse outcomes, the directors of the IMF’s Finance Department and Strategy, Policy, and Review Department write in a blog. Bernard Lauwers and Ceyla Pazarbasioglu say the benefits of allocation, which injected $650 billion of liquidity into the global economy to help propel pandemic-hit countries toward recovery, are poised to continue. “More than $100 billion of SDRs in pledges announced by the G20 are being channeled from stronger members to vulnerable low-and middle-income countries, amplifying the direct benefits of the allocation,” the authors write, underscoring the conclusion of a new study.

GITA GOPINATH IN SOUTH AFRICA Emerging market outlook

Gita Gopinath, the IMF's first deputy managing director, spoke about the challenges that emerging markets face and policies to drive growth at a conference hosted by South Africa's central bank. Watch a clip of Gopinath's conclusions from the conference.

FRAGILE STATES Africa’s Fragile States Are Greatest Climate Change Casualties (Credit: JurgaR/iStock by Getty Images) Climate change poses grave threats to countries across Africa, but especially fragile and conflict-affected states, according to a blog by the directors of the IMF’s African and Middle Eastern departments. From the Central African Republic to Somalia and Sudan, fragile states suffer more from floods, droughts, storms and other climate-related shocks than other countries, Abebe Aemro Selassie and Jihad Azour write in the blog, which was published ahead of the African Climate Action Summit in Kenya. An IMF paper shows that climate change inflicts more lasting macroeconomic costs in fragile countries. Cumulative losses in gross domestic product reach about 4 percent in fragile states three years after extreme weather events. That compares with around 1 percent in other countries. “This means that incomes in fragile states will be falling further behind those in other countries,” the blog authors write.

The dramatic opening up of markets to international trade over the past 30 years has been a boon to many developing economies but it has not benefitted everyone. Nina Pavcnik grew up in Yugoslavia and witnessed firsthand the effects of open markets on the lives of people across the border. Now Professor of Economics and International Studies at Dartmouth College, Pavcnik sits down with journalist Rhoda Metcalfe in this podcast to talk about her research as part of our series on extraordinary Women in Economics.

LATIN AMERICA Latin America’s Response to Recent Global Shocks (Credit: Orbon Alija/iStock by Getty Images) Latin America has successfully navigated economic turmoil and the region must now boost inclusive growth, reduce debt and capitalize on new opportunities, the director of the IMF’s Western Hemisphere Department writes in a blog. Rodrigo Valdes says that most of Latin America has remained resilient amid significant shocks over the past three years—including the pandemic, surging global inflation, trade tensions between large economies, and tighter global financial conditions—but countries also responded with appropriate macroeconomic policies. “While large challenges persist, such as low economic growth and high debt levels, tackling them becomes more achievable when more countries in the region have robust and effective macroeconomic frameworks,” Valdes writes.

F&D MAGAZINE New Issue: Time For Transformation (Credit: Magda Azab and IMF) For centuries, Arab nations led the world in the pursuit of knowledge and in scientific innovation and were among the most economically advanced places on Earth. Today, the Middle East and North Africa are at a crossroads. F&D magazine’s September issue, Time for Transformation, explores the choices these politically and economically diverse nations face. “With economic leaders gathering soon in Marrakech, Morocco, for the IMF and World Bank Annual Meetings, this issue of F&D explores how the Arab world can tap growth opportunities and rebuild its economic standing,” writes F&D editor-in-chief, Gita Bhatt. Contributors include the IMF’s Jihad Azour on overhauling the Arab world’s economies, the Peterson Institute's Adnan Mazarei on debt, Jordan’s finance minister Mohamad Al-Ississ on progressive fiscal policies, Lebanon’s former economy minister Nasser Saidi on regional trade, Egypt’s minister of international cooperation Rania Al-Mashat on climate finance, Johns Hopkins’ Vali Nassr on a generational shift in geopolitics, and many more. Want to get a print copy delivered to your home or office? Click here to subscribe

MONEY LAUNDERING Money Laundering Poses a Risk to Financial Stability (Credit: Adobe Stock and IMF Photo) Money laundering takes a toll on society by eroding trust in the integrity of financial systems and curbing cross-border crime demands a united global effort and innovative approaches, IMF economists write in a blog. IMF staff partnered with eight Nordic and Baltic countries in a first-of-its-kind anti-money laundering technical assistance project. They conclude that combatting money laundering is beyond the capacity of any single nation—and that countries must innovate together to find a solution. “The bottom line is that continued analysis of financial integrity’s impact on stability can fortify the global financial system against money laundering shocks,” they say.

Fossil-fuel subsidies surged to a record $7 trillion last year as governments supported consumers and businesses during the global spike in energy prices caused by Russia’s invasion of Ukraine. As the world struggles to restrict global warming to 1.5 degrees Celsius and parts of Asia, Europe and the United States swelter in extreme heat, subsidies for oil, coal and natural gas cost the equivalent of 7.1 percent of global gross domestic product. That’s more than governments spend annually on education (4.3 percent of global income) and about two-thirds of what they spend on healthcare (10.9 percent). To slow climate change, countries must scale back fossil-fuel subsidies, according to the Chart of the Week's authors.

Weekly Roundup CRYPTO ASSETS Roadmap to Contain Crypto Risks The IMF and Financial Stability Board have outlined a comprehensive approach to stop crypto assets from imperiling macroeconomic and financial stability in a joint report. The report finds that comprehensive regulation and supervision of crypto assets should be a baseline to address macroeconomic and financial stability risks. SOCIAL UNREST No Spike in Protests Protests and other forms of social unrest have been broadly stable since early 2022, with the proportion of countries experiencing major unrest remaining about the same, according to the latest update of the IMF’s Reported Social Unrest Index. This continues the trend of the past few years, as protestors return to the streets after staying at home during the pandemic. The index uses media reports to measure major social unrest in 130 countries since the late 1980s.

MARK YOUR CALENDAR

SEPTEMBER 13, 9 AM ET Global Debt The latest update of the IMF’s Global Debt Database shows that global debt fell by 10 percentage points of GDP for the second consecutive year, to 238 percent of GDP. This discussion will focus on the where debt-related risks are rising and how to address those risks.

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.

Nick Owen Editor IMF Weekend Read nowen@IMF.org