Dear MARIA, welcome to the April 24 briefing from the Spring MeetingsIn Thursday's edition of the daily briefing, we highlight the Fund's Global Policy Agenda, the Debate on the Global Economy, Asia-Pacific and Middle East press briefings, Governor Talks from Ethiopia and Poland, and much more. |
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(Credit: Joshua Roberts/IMF Photo) Countries must work constructively to resolve trade tensions, safeguard economic and financial stability, and double down on pro-growth reforms to raise productivity, the IMF’s managing director said on Thursday. Kristalina Georgieva told a briefing on the Global Policy Agenda that the world economy is confronting a major new test, with a spike in uncertainty leading to steep downgrades to global growth, as shown in the World Economic Outlook released this week. Countries must address the imbalances that are fueling tension among the world’s major economies, with China needing to boost private consumption and shift to services, and others including the United States needing to reduce fiscal deficits, Georgieva said. The managing director added that the severity of the test facing the global economy today creates “urgency for action” to strengthen economies in a world of rapid change. “All countries should seize this moment to lower their trade barriers.” |
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(Credit: Tom Brenner/IMF Photo) Resolving problems, advancing reforms once thought impossible, and the right amount of deregulation were among the topics of a lively Debate on the Global Economy on Thursday. With spirited moderation from CNBC anchor Sara Eisen, the finance minister of Germany, Jörg Kukies, the UK chancellor of the Exchequer, Rachel Reeves, Argentina’s minister for deregulation and state transformation, Federico Sturzenegger, and Kristin Forbes, management and global economy professor at the Massachusetts Institute of Technology, joined IMF Managing Director Kristalina Georgieva in discussing their approaches to deregulation and some movie tips as well. “People are anxious,” Georgieva acknowledged at the opening, about ongoing policy uncertainty, accelerating inflation and the potential loss of the rules-based global trading system. Chancellor Reeves said that trade-related global imbalances need to be addressed, and that her country is approaching trade negotiations with the US with “a cool head,” but that it is also negotiating with the European Union, Gulf countries and India. Minister Kukies added that even for a powerful exporter like Germany, allowing the EU to negotiate on behalf of its 27 member countries increases the odds of achieving a good outcome. “It is about access on both directions to a big market,” he said, referring to the EU’s 450-million population. The policymakers from Argentina, Germany and UK agreed on the need to push for deregulation in their economies, to reduce bureaucracy and increase the business environment. “Regulation is basically anti-entrepreneurial,” said Sturzenegger. Reeves concurred on reducing the burden on the private sector, listing various reforms to facilitate investment, including consolidating pension funds to enable them to invest at a greater scale. Forbes acknowledged the growing presence of the state in many economies. “The pendulum swung too far, it’s probably time to carefully go back,” she said, highlighting the need to be careful, especially in the financial sector. Describing himself as a “problem solver,” Kukies mentioned how Germany is hoping to foster a more entrepreneurial culture, including stimulating its citizens from an early age to dip a toe in the stock market. “The US has always been much better in funding companies with no collateral, no cash flow and no proven business model,” he said. “What you heard from the three policy makers on this panel is that they do things that were seen as impossible until not long time ago,” Georgieva replied. “What we’ve seen this week is a whole collection of the impossible becoming possible…It’s the realization that if we are moving in a new era, we better make sure that we protect what works, but also we shape it up differently,” the Managing Director added. |
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(Credit: IMF Photo/Alyssa Schukar) The economic outlook for Asia and the Pacific deteriorated following recent US tariff announcements and responses by trading partners, the latest IMF projections show. “The region is both significantly exposed to the shock and faces a larger shock than other regions,” Asia-Pacific Department Director Krishna Srinivasan said at a briefing Thursday. Greater trade uncertainty “has further worsened the negative outlook,” he said. Growth will slow to around 3.9 percent and 4 percent this year and next, down from a 4.6 percent pace last year, according to the reference forecast based on data through April 4. Decreased external demand, weakness in the technology industry, and subdued private consumption in several countries will weigh on activity, Srinivasan told reporters. Asia’s economies are especially exposed to trade policy shocks and uncertainty, Srinivasan said, because many are more open, trade-oriented, and tied to global supply chains—with increasing exposure to demand from the United States. Despite the adverse trade shock and other challenges, from demographic trends to sluggish productivity growth, Srinivasan underscored how domestic demand and deeper regional integration can reduce external reliance and strengthen economic resilience, while new technologies like artificial intelligence can spur growth and productivity gains. |
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(Credit: IMF Photo/Tom Brenner) “The global economy stands at a delicate crossroads,” said Jihad Azour, director of the IMF’s Middle East and Central Asia Department, at a press briefing. Last year was particularly challenging for the Middle East and North Africa (MENA) region, as conflict led to severe human and economic costs. Regional growth in 2024 was 1.8% - a downgrade revision of 0.2 percentage point from the October World Economic Outlook forecast. Despite these challenges and high uncertainty, growth in the MENA region is projected to pick up in 2025 and 2026, assuming oil output rebounds, conflict-related impacts stabilize, and progress is made on structural reform implementation. However, expectations have been revised down compared to the October forecast, reflecting weaker global growth. The IMF now projects growth at 2.6% in 2025 and 3.4% in 2026, a downward revision of 1.3 and 1 percentage points, respectively. Economic activity in the Caucasus and Central Asia, on the other hand, exceeded expectations in 2024. It grew by 5.4% - driven by spillover effects from the war in Ukraine, which boosted domestic demand. (Credit: IMF Photo/Sarah Silbiger) Price stability and financial stability. Are they complementary, or can they be at odds? How to articulate these two key central bank mandates in times of high inflation? Or worse, when financial stress is also rising? How does all of that affect and depend on central bank independence? These topics were discussed on Wednesday by a panel of academics and policymakers. IMF chief economist Pierre-Olivier Gourinchas presented IMF staff research showing how price stability and financial stability interact conceptually. “Typically, central banks like to achieve separation. They want to be able to tighten their policy rate and somehow deal with the financial stress with other instruments, so that it doesn’t threaten their mandate to maintain price stability. Whether they can do certain practices is not a given and will depend on the cost of using additional tools.” While arguing that in general price and financial stability could be complementary, Sarah Breeden, deputy governor for financial stability at the Bank of England, described to the audience how the Bank of England managed the financial stress caused by the so-called mini-budget crisis in the UK in 2022 against the background of high inflation. “We were effectively able to navigate the perceived tradeoff through the careful design of our intervention.” She highlighted three key features: 1) the intervention was targeted; 2) the intervention was temporary, strictly limited to 13 days; and 3) “It was conducted with clear purpose and accountability to intervene in markets explicitly for financial stability purposes.” Chang Yong Rhee, governor of the Bank of Korea, and former director of the IMF’s Asia and Pacific Department, recalled how in 2022 the Bank of Korea had to deal with financial stress in the context of an inflationary episode. While inflation was high, the central bank had to make liquidity injections to support financial institutions affected by a crisis in the real estate sector, aggravated by pressures in foreign exchange markets. The central bank had to continue tightening monetary policy while providing liquidity, and intervening in the foreign exchange market. “Believe me, this separation principle doesn’t [always] work,” he quipped to the IMF chief economist, referring to the fact that markets perceived the interventions to support financial stability as being at odds with the central bank’s price stability objective Viral Acharya, New York University professor and former deputy governor of the Reserve Bank of India, underscored the importance of central banks’ sticking to their price stability mandate, when inflation is high. He worried that flexibility in the monetary policy framework could not only erode the credibility of the central bank but also affect its ability to properly regulate and rein in risk-taking in the financial system. Gourinchas concluded that “financial stability and price stability are complements and help each other. You want to do everything to avoid a situation where those two things are not necessarily aligned.” He highlighted that central bank independence is a critical feature: “If you start to deviate from your price stability mandate… the concern is that somehow the market will read this as a sort of financial put… But you’re promising that you’re going back to your central bank target, and that’s where central bank independence is absolutely critical.” |
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(Credit: IMF Photo/Sarah Silbiger) Ethiopia’s monetary policy reforms are positively impacting the economy, according to Governor Mamo Mihretu of the National Bank of Ethiopia. In a discussion with IMF’s Abebe Aemro Selassie, Mihretu explained that the reforms promote macroeconomic stability and private sector growth. Key changes include making price stability the central bank's primary goal, introducing a policy rate, creating open market operations, and establishing a monetary policy committee. Results have been promising: inflation has decreased from 30 percent to 13 percent in two years, about 80 percent of credit is directed to the private sector—and for the first time in 12 years, there may be no monetary financing of the budget, Mihretu said. Additionally, Ethiopia has fully liberalized its foreign exchange regime, significantly increasing supply. Mihretu emphasized the importance of clear communication and careful sequencing of reforms to build public trust and ensure successful implementation. |
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(Credit: IMF Photo/Allison Robbert) Poland’s Finance Minister Andrzej Domański spoke with Alfred Kammer, Director of the IMF’s European Department, on Europe’s economic challenges and opportunities. On trade tensions, Domański emphasized that while no one wins a trade war, free trade continues to reduce poverty and inequality. He called for a mutually beneficial deal and supported the EU Commission’s proposal of a tariff-free trade on industrial goods with the U.S. He compared policy uncertainty to a tax that deters business, noting that high U.S. tariffs are driving capital into Europe and lifting Polish stock indices to record highs. Poland’s projected 3.9% growth in 2025 is also driven by strong consumption, EU funds, and global value chain integration—though geopolitical tensions pose risks. Poland plans to spend 4.7% of its GDP on defense next year—double the EU average—with half going to new equipment. Domański backed the rearmament package and urged its swift passage through the EU parliament. He stressed the importance of efficient spending through joint procurement and a building robust EU defense industry. Addressing energy security, he highlighted investments in renewables, nuclear power, energy storage, and grid integration. Poland is building its first nuclear plant and supporting private sector reactor projects. Domański also noted the need to mobilize household savings—ten trillion euros across the EU—for growth. Developing market-based retirement plans could channel this capital into domestic investment. While Poland’s GDP has tripled since transitioning to a market economy, Domański stressed the need to invest in human capital, streamline regulation, support trade, and expand capital market access. |
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(Credit: IMF Photo/Sarah Silbiger) Two thirds of banks expect to make their assets available on digital platforms within five years, IMF Managing Director Kristalina Georgieva said in her opening remarks at this panel discussion. She outlined three goals that these platforms must meet to benefit the financial system: help economies preserve monetary stability; leave no country out; and have solid legal foundations. Tobias Adrian underscored that while technologies are means of moving assets, trust remains the base of the financial system. Reserve Bank of Australia governor Michele Bullock summarized the country’s pilot of the wholesale central bank digital currency launched last September. The central bank is cooperating with private sector to create a two-tier financial system, following IMF guidelines. Piero Cipollone from the European Central Bank remarked that sixty percent of European banks are interested in digital assets and that the ECB needs to be in the digital market to provide safe assets to its users. It already launched an experimental CBDC and is willing to move on to the production phase to build an interoperable digital ledger system. Agustin Carstens, general manager at the Bank for International Settlements, believes that digital central bank money can improve the workings of the financial system, making processes more efficient and allowing for transactions that are not possible or viable today The BIS is currently working with central banks and financial firms to make cross border payments more efficient and use digital money to enhance monetary policy transmission, among other projects. Nandan Nilekani, chairman of Infosys, discussed his concept of “finternet”, co-written with Carstens: a unified architecture for all types of assets that puts power in the hands of users and is available across the globe. He underscored that technology is not the challenge: credentialling systems, digital wallets and blockchain solutions should be available as free and open source resources within a few years. Panelists agreed that central banks should promote both ease and safety of transactions by regulating digital money in cooperation with governments and private sector. |
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NUMBER OF THE DAYGrowth in the Asia Pacific region is projected to drop to 3.9 percent this year, from 4.6 percent last year. The region accounted for nearly 60 percent of global growth in 2024. |
3.9% ECONOMIC GROWTH IN ASIA-PACIFIC |
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(Credit: IMF Photo) The Data for Decisions Fund (D4D) has launched a new phase. D4D is the IMF’s main multi-partner vehicle for providing statistics training and technical assistance to developing economies, particularly low- and lower middle-income countries and fragile and conflict-affected states. In his opening remarks at the launch event, IMF Deputy Managing Director Bo Li emphasized the importance of high-quality data for evidence-based policymaking. Speakers from beneficiary countries including Bangladesh, Cambodia, and Zambia highlighted the value of reliable data, and thanked the D4D for supporting capacity development in this area. Ahsan H. Mansur, Governor of the Central Bank of Bangladesh, said that quality data was “vital” for making evidence-based policies. Governor of the Bank of Zambia Denny Kalyalya concurred, and said the importance for quality data in his country couldn’t be overemphasized. Representatives from D4D donor countries including China, Japan, Korea, Saudi Arabia, and Switzerland also spoke at the event. |
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(Credit: IMF Photo/Allison Robbert) |
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