ΙΜF Weekend Read

 

Dear MARIA, In today's edition, we highlight: Global fragmentation China's economic outlook AI and the four-day workweek Inflation lessons from history Malawi's reform plans Geopolitics and trade Fintech and growth

GLOBAL FRAGMENTATION In Shock Prone World, Strong Economic Fundamentals Are Key (Credit: IMF) Geopolitical tensions have led to fragmentation, harming global growth prospects, IMF Managing Director Kristalina Georgieva said in a conversation with Washington Post columnist David Ignatius. From conflict to climate, we live in a more fragmented and shock prone world, Georgieva added, noting that countries with strong economic fundamentals are best placed to withstand such shocks. Strengthening economic fundamentals requires policymakers to build “buffers” by, for instance, increasing tax revenues and being disciplined on public spending. Georgieva also discussed the IMF's World Economic Outlook Update, released last week, emphasizing that the global economy is poised for a “soft landing” in 2024, with inflation gradually going back to target without triggering a recession. Other topics included the US economy, AI's potential to boost productivity, and Red Sea trade disruptions. Watch the full interview Meanwhile, IMF First Deputy Managing Director Gita Gopinath outlines her views on fragmentation in an article for Foreign Policy Magazine. “It is in everyone’s interest to advocate strongly for a multilateral rules-based trading system and the institutions that support it. It’s the best chance for a world where people can expect a brighter, more prosperous future,” she writes.

WEBCAST Shaping Africa's Future

Watch a conversation between Masood Ahmed of the Center for Global Development and the IMF’s Abebe Aemro Selassie. The discussion focused on the challenges of tackling poverty and economic disparities, particularly on the African continent. Also watch Selassie's media briefing on sub-Saharan Africa.

CHINA Post Pandemic Recovery, Property Market Strains (Credit: iStock by Getty Images/SeanPavonePhoto, stockinasia & baona) China’s economic activity rebounded in 2023 following the post‑COVID reopening with real GDP estimated to have grown broadly in line with the authorities’ growth target of around 5 percent, reports the IMF’s annual health check of China’s economy (Article IV consultation). The recovery was driven by domestic demand, particularly private consumption, and assisted by supportive macroeconomic policies, including further relaxation of monetary policy, tax relief for firms and households, and fiscal spending on disaster relief.  Looking ahead, growth is projected to slow to 4.6 percent in 2024 amid the ongoing weakness in the property sector and subdued external demand. Over the medium term, growth is projected to gradually decline further and is projected at about 3½ percent in 2028 amid headwinds from weak productivity and population aging. Read the staff report, as well as the Country Focus article on managing the medium-term slowdown in China’s real estate sector. Watch the press briefing.

Productivity has been the driving force behind the five- sometimes six-day workweek, but there is a growing body of evidence that shows a shorter week is equally, if not more productive in many respects. Juliet Schor is an economist and sociologist at Boston College and heads the research for global trials of companies instituting four-day workweeks. In this podcast, Journalist Rhoda Metcalfe speaks with Juliet Schor about her four-day week mission, as part of our special Women in Economics series.

MONETARY POLICY History's Inflation Lessons (Credit: Getty Images) Aided by the sharpest rise in interest rates in a generation, inflation has started to subside at last, but it is still too soon for policymakers to celebrate victory over inflation, write IMF economists Anil Ari and Lev Ratnovski in Finance & Development Magazine. The authors’ study of over 100 inflation shocks since the 1970s offers two reasons for caution. First, history teaches us that inflation is persistent. And second, countries have historically celebrated victory over inflation and loosened policy prematurely in response to an initial decline in price pressures. "Today’s policymakers must not repeat their predecessors’ mistakes. Central bankers are right to warn that the inflation fight is far from over, even as recent readings show a welcome moderation in price pressures." Read the full article This article appeared in the December issue of F&D. Read other articles by Daron Acemoglu, Simon Johnson, Ian Bremmer, Mustafa Suleyman, Anton Korinek, Hélène Landemore, Nandan Nilekani, Tanuj Bhojwani, Gita Gopinath, Robert Horn, Jeremy Wagstaff, Kerry Dooley Young, Eswar Prasad, Christopher Evans, Marika Santoro, Martin Stuermer, Gita Bhatt, Erik Brynjolfsson, Gabriel Unger, Andrew Berg, Chris Papageorgiou, Maryam Vaziri, Daniel Björkegren, Joshua Blumenstock, and many more.

MALAWI Plans to Create a Stable and Sustainable Economy (Credit: AdobeStock/Storyteller & iStock by Getty Images/Nikada) Stagnant growth, unsustainable debt, and the adverse effects of multiple shocks have compounded Malawi’s economic challenges. In the wake of the IMF Executive Board’s approval of a $175 million Extended Credit Facility arrangement intended to support the government’s commitment to economic reforms, the IMF's resident representative for Malawi, Nelnan Koumtingue, shared his reflections on recent challenges and the way forward in an interview with IMF Country Focus. One of the ECF arrangement's most urgent goals is to support the authorities’ commitment to restore macroeconomic stability by creating an environment of low or moderate inflation and a stable exchange rate, he noted. "The road ahead remains challenging, but macroeconomic stability is a necessary condition to build a foundation for inclusive and sustainable growth and resilience to climate-related shocks.” Read the full interview Learn more about the ECF, and read our press release and FAQs on Malawi.

Weekly Roundup GLOBAL ECONOMY Geopolitics and International Trade Do political regimes determine how geopolitics influence international trade? An IMF staff paper finds that geopolitical developments are not as important as income and geographical distance in determining bilateral trade flows and that democracy fosters international trade and moderates the potential negative impact of geopolitics. While the impact of democracy and its interaction with geopolitical distance are significant across all countries, the magnitude of these effects is substantially larger in advanced economies than in developing countries, reflecting the greater strength of democratic institutions, on average, in advanced economies. FINANCIAL SECTOR Fintech and Economic Growth An IMF staff paper investigates the relationship between fintech and economic growth in 198 countries over the period 2012–2020. It finds that while digital lending has a statistically significant positive effect on economic growth, digital capital raising has a large but insignificant effect. The overall impact of fintech including all instruments is positive and statistically significant because of the overwhelming share of digital lending in total. While the positive relationship between fintech and growth is stronger in magnitude in advanced economies, the statistical significance of this effect is higher in developing countries. ECONOMIC HISTORY The IMF and the European Debt Crisis IMF historian Harold James' new book explores the Fund’s engagement in Europe in the aftermath of the 2008 global financial crisis, and especially after 2010. It explores the big geopolitical debates about the appropriate role of the Fund in the aftermath of the global financial crisis and examines the intellectual and policy shifts that took place in the IMF as a result of the controversies about its European programs. ABOUT THE IMF How Does the IMF Give Policy Advice? A core responsibility of the IMF is monitoring the economic and financial policies of member countries and providing them with policy advice, an activity known as surveillance. As part of this process, which also takes place at the global and regional levels, the IMF identifies potential risks and recommends appropriate policy adjustments to sustain economic growth and promote financial stability. Read the factsheet to learn more.

MARK YOUR CALENDAR

FEBRUARY 12 | 11:00 AM ET | 4:00 PM UTC Foreign Policy Live with Gita Gopinath Is the global economy in better shape than we expected in 2024? And if so, how do we keep it that way? Join FP Live for an in-depth discussion with IMF First Deputy Managing Director Gita Gopinath, hosted by Foreign Policy's Editor in chief, Ravi Agrawal.    FEBRUARY 15 | 9:00 AM ET | 2:00 PM UTC Addressing the Hidden Dimensions of Poverty Progress in poverty reduction has been measured primarily in terms of consumption or income, but other aspects of life are also critical for well-being. This conference will bring together academics, practitioners, and people who have direct experience of poverty as co-researchers to better understand the key dimensions of poverty and their relationships.

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