IMF interesting update

 

Dear MARIA, We just published a new blog—please find the full text below.  G20 Economies Should Target Reforms to Boost Medium-Term Growth Prospects (Credit: Galeanu Mihai/iStock by Getty Images) By Paula Beltran Saavedra, Nicolas Fernandez-Arias, Chanpheng Fizzarotti, and Alberto Musso For most Group of Twenty economies, growth is poised to weaken over the next five years and remain well below what was typical in the two decades before the pandemic. That’s one of the biggest shared challenges for the group, which accounts for about 85 percent of global gross domestic product. Growth is more robust across the African Union, which joined the G20 last year, but booming populations mean those economies also must create jobs for millions of young people entering the labor market. For both groups, as well as the European Union, lifting growth is essential to improving outcomes for people, and there's a common solution: implementing priority reforms can significantly boost prospects for growth over the next five years, or medium term, as our new report to the G20 outlines. Our analysis also indicates that payoffs from structural reforms are greatest when they are carefully sequenced and reflect social consensus. Various challenges underscore why it’s time to invest in growth-enhancing reforms. Subdued productivity growth, reinforced in some countries by adverse demographic trends, holds back potential growth, as Chapter 3 of the April 2024 World Economic Outlook details. Sustainable growth also is imperiled by elevated public debt, and increased geoeconomic fragmentation and protectionism. As the Chart of the Week shows, the biggest priority across countries in these groups is reforming fiscal policy frameworks to aid lasting consolidation of government budgets. Specifically, most G20 advanced economies and several EU economies would benefit from tighter public spending limits, while for most G20 emerging market and developing economies reforms to boost government revenues should be prioritized. Several African Union countries could benefit from enhanced fiscal transparency. For many G20 and African Union economies, there are two other key areas for high priority structural reforms. First, the quality of education and skill training must be improved to better match skills with job opportunities. Second, reforms to accelerate the energy transition are essential, such as improving renewable energy capacity, enhancing the carbon tax efficacy, and phasing out fossil fuel subsidies. In several African Union economies, governance reforms are also urgently needed to strengthen the rule of law, fight corruption and improve public finance management. Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org

Dear MARIA, In today's edition, we highlight: Georgieva: fiscal consolidation, ambitious reforms key to boosting growth New European wealth gauge helps policymakers address inequality Georgieva at G20 Leaders' Summit Economic growth in the Caucasus and Central Asia 12th IMF Statistical Forum, and much more

APEC LEADERS' RETREAT Georgieva: Fiscal Consolidation, Ambitious Reforms Key to Boosting Growth (Credit: IMF Photo) In an environment of slow growth and high public debt, policymakers should simultaneously pursue two goals, said IMF Managing Director Kristalina Georgieva in remarks at the APEC Leaders’ Retreat in Lima, Peru. “One, fiscal consolidation to rebuild buffers for the next shock while preserving space for priority public investments, especially in light of the massive needs of the green and digital transformations; and two, ambitious reforms to lift growth potential and energize job creation, starting right away, with a focus on mobilizing private capital, improving productivity, and, in some cases, building stronger institutions and governance,” Georgieva said. Reaching the first goal requires difficult choices on how to raise revenues and make spending more efficient, while at the same time ensuring that policy actions are well-explained to earn trust; reaching the second is also not easy as the pace of reforms has been slowing since the global financial crisis, as discontent has grown, she noted. However, progress is possible, said Georgieva. “APEC economies that show strong resilience demonstrate what works: good policy design, good communication, and help for those who will lose out....As you work to further empower your citizens, include them in your nations’ progress, and grow your economies, we at the Fund stand ready as partners.” Read the Speech

ECONOMIC GROWTH New European Wealth Gauge Helps Policymakers Address Inequality (Credit: Bombaert/iStock Photo) Economists monitor income disparities because they can harden into more structural wealth inequalities that concern policymakers. Wider wealth gaps may also impact monetary policy transmission and financial stability, write the IMF's Henning Ahnert, Francien Berry, Darja Milic, and Jorrit Zwijnenburg in a new blog. Accordingly, the European System of Central Banks developed new experimental Distributional Wealth Accounts for the euro area and most European Union countries. Combining wealth information drawn from household surveys with broader economic indicators, the new data offer an integrated picture of wealth across groups that match national accounts figures. This year’s release also marked a significant advance in addressing the Group of Twenty’s recommendation on household wealth results, as part of the third phase of the Data Gaps Initiative, a G20-led partnership involving the IMF, the Inter-Agency Group on Economic and Financial statistics, the Financial Stability Board, and statistical authorities, working to enhance economic and financial data quality worldwide. Read the Blog

G20 RIO SUMMIT Georgieva Expresses Gratitude for G20 Support (Credit; IMF Photo) In recent years, the trust G20 leaders have demonstrated in the IMF has allowed the institution to provide record-high support to members hit by a series of exogenous shocks, said IMF Managing Director Kristalina Georgieva in remarks at the G20 Leaders’ Summit in Rio de Janeiro, Brazil. “We have injected over $1 trillion in liquidity and reserves and offered timely policy analysis and advice – contributing to the resilience of the global economy," Georgieva told attendees. Expressing thanks for the G20's ongoing support, Georgieva noted ways in which the financial strength of the Fund has been fortified, including building strong financial buffers to meet the record-high needs of members and reaching an agreement to increase quota resources by 50 percent. She underscored the Fund’s focus on promoting macroeconomic stability and growth, as well the recognition that the Fund must be more inclusive and representative, citing the addition of a third chair for Sub-Saharan Africa on the Board of Executive Directors as a recent example. Read the Remarks

CAUCASUS AND CENTRAL ASIA Economic Growth Requires Reforms Economic growth in the Caucasus and Central Asia continues to be robust and widespread. However, the region faces exposure to geoeconomic developments, resulting in increased uncertainty as trade, financial flows, and migration patterns show tentative shifts. Enhancing medium-term growth will necessitate the effective implementation of reforms. In this context, what policies and reforms can assist countries in establishing a stable environment that fosters investment and sustainable economic growth? Jihad Azour, Director of the Middle East and Central Asia Department at the IMF; Sergei Guriev, Dean of the London Business School; and Lyaziza Sabyrova, Regional Head of the Central and West Regional Department at the Asian Development Bank held a discussion on these critical issues and more, as highlighted in the IMF’s latest Regional Economic Outlook for the Middle East and Central Asia. Read the full report in English and in Russian. Watch the Event

12TH IMF STATISTICAL FORUM Exploring the Implications of AI on the Economy (Credit: IMF Photo) “To make AI a force for good that boosts inclusive economic growth, we need concerted, coordinated actions by governments, the private sector, and civil society. And what do we need to inform those actions? Data! Reliable, timely, accurate, actionable data.” IMF Managing Director Kristalina Georgieva told participants at the IMF 12th statistical forum this week. This year’s forum focused on “Measuring the Implications of AI on the Economy”. The forum identified gaps in existing data and tools to measure AI’s impact on the economy and discussed ways to address these measurement challenges. IMF First Deputy Managing Director Gita Gopinath spoke with Google’s Senior Director David Weller at the session AI at a Crossroad: Opportunities, Risks, and the Path Forward, which explored how AI could boost productivity, accelerate progress, and benefit society and the economy. The Fund's Deputy Managing Director Bo Li had a one-on-one discussion with Prof. Susan Athey on navigating the opportunities and challenges of AI adoption. The two-day forum also featured more than 40 speakers, including IMF Chief Statistician Bert Kroese, World Bank Chief Economist Indermit Gill, and Professor Joshua Gans. Watch the opening and closing sessions.

DIGITAL ECONOMY New Open Finance Guidelines Aim to Spur Financial Inclusion (Credit: IMF Photo/Daro Sulakauri) A coalition of international organizations, including the IMF, has launched high-level guidelines for public authorities seeking to harness 'open finance' to accelerate digital financial services and innovation and increase usage of a broader range of financial products. Alongside investment in digital public infrastructure, and ongoing efforts to reach the 1.4 billion people globally who still do not have access to a basic transaction account, open finance can be the next frontier for the growth of the financial services industry. 76% of the world’s population now have access to a financial account and open finance can expand their use and increase the benefits customers derive from financial services. “The entry of new financial players can boost innovation and competition, but it also creates regulatory challenges,” said IMF Managing Director Kristalina Georgieva in a statement. “Competition may be at risk if dominant players from other sectors can access financial data without sharing their own. Public authorities will need to closely monitor the ecosystem to ensure it meets policy objectives.” Known as the "Key Considerations for Open Finance", the development of these guidelines was led by CGAP in collaboration with the BIS, the International Monetary Fund (IMF), the Office of the United Nations’ Secretary-General’s Special Advocate for Financial Health (UNSGSA), and the World Bank.

For most Group of Twenty economies, growth is poised to weaken over the next five years and remain well below what was typical in the two decades before the pandemic. That’s one of the biggest shared challenges for the group, which accounts for about 85 percent of global gross domestic product. Growth is more robust across the African Union, which joined the G20 last year, but booming populations mean those economies also must create jobs for millions of young people entering the labor market. For both groups, as well as the European Union, lifting growth is essential to improving outcomes for people, and there's a common solution: implementing priority reforms can significantly boost prospects for growth over the next five years, or medium term, as our new report to the G20 outlines. Our analysis also indicates that payoffs from structural reforms are greatest when they are carefully sequenced and reflect social consensus. Various challenges underscore why it’s time to invest in growth-enhancing reforms. As the Chart of the Week shows, the biggest priority across countries in these groups is reforming fiscal policy frameworks to aid lasting consolidation of government budgets. Read More

Weekly Roundup IMF PANEL DISCUSSION Transforming Industries for Growth in a Fragmented World Countries that have more diversified economies tend to grow faster. “But diversification is not always associated with a reduction in poverty, if the growth that is generated is not inclusive in some ways,” said Daouda Sembene, CEO of AfriCatalyst, in a conversation with IMF Advisor Chris Papageorgiou and Georgia’s former Minister of Finance Aleksi Aleksishvili.  Moderated by Bloomberg’s Lisa Abramowicz, the speakers discussed a recent IMF paper on how strategic policy shifts and targeted investments can facilitate diversification. These include broad-based policies, such as measures to improve the business environment and so-called vertical strategies, often referred to as industrial policy, which can address market failures but “which you must get right” according to Papageorgiou, “because if you don’t, the cost to the economy is huge”. “Our work,” he added, “shows that [industrial policies] should be around big sectors, rather than focusing on specific firms.”   MIDDLE EAST AND NORTH AFRICA Economic Growth and Challenges The IMF’s Taline Koranchelian took part in a discussion this week on Economic Growth and Challenges in North Africa and the Middle East: Strategic Implications from the 2024 World Bank and IMF Meetings at an event at Johns Hopkins University’s School of Advanced International Studies (SAIS). Speakers included the World Bank Group’s Roberta Gatti, Amr Hamzawy, Director of the Middle East Program at the Carnegie Endowment for International Peace, and Vali Nasr, Professor of Middle East Studies and International Affairs at SAIS.   DEPARTMENTAL PAPER Violent Crime and Insecurity in Latin America and the Caribbean: A Macroeconomic Perspective Violent crime and insecurity remain major barriers to prosperity in Latin America and the Caribbean (LAC). With just 8 percent of the global population, LAC accounts for a third of the world’s homicides. Building on the existing literature, this Departmental Paper explores the interplay between insecurity and macroeconomic outcomes, with emphasis on the relationship between violent crime and growth, the business climate, and public finances. The analysis shows that national-level crime indicators mask huge internal disparities, and that municipalities with 10 percent higher homicide rates have lower economic activity by around 4 percent. The paper concludes with policy lessons and areas for additional collaboration between national authorities, international partners, and key stakeholders.

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.   The Weekend Read will return on December 6.

Miriam Van Dyck Editor IMF Weekend Read mvandyck@IMF.or