IMF update

 

Dear MARIA,   In today’s edition, we highlight: Kristalina Georgieva on the Future of Work Fiscal Reforms Can Help As Korea Ages Steering Nepal's Economy Amid Global Challenges F&D: Why Civilizations Flourish—and Fail Call for Papers: IMF MENA Annual Research Conference  Latest Issue of IMF Research Perspectives ARTIFICIAL INTELLIGENCE New Skills and AI Are Reshaping the Future of Work AI skills command wage premiums, but they have not contributed to employment growth so far, writes IMF Managing Director Kristalina Georgieva in her latest blog ahead of the World Economic Forum meeting in Davos.   New IMF analysis of millions of online vacancies shows that one in 10 job postings in advanced economies and one in 20 in emerging market economies require at least one new skill. Think of new digital skills, from IT to social media, that have emerged over the past decade.   The good news is that increased demand for these broader skills benefited wages and employment. In the US and UK, for example, job postings that include a new skill tend to pay about 3 percent more—which can help boost the local economy.   The picture for AI-related skills is more complex. They, too, command wage premiums. But employment levels in AI-vulnerable occupations are lower in regions with high demand for AI skills—3.6 percent lower after five years than in regions with less demand for these skills.   “Today’s students need cognitive, creative, and technical skills that complement AI and help them use it rather than compete with it,” notes Georgieva, calling for a redesign of education systems. Countries should also support workers by enhancing social protection and by helping them retrain and move to new opportunities. Read the Blog ASIA As Korea Ages, Fiscal Reforms Can Help Safeguard Government Finances The Republic of Korea’s population is aging faster than almost any other country, with one-fifth of its people now over 65. This demographic shift is set to increase government spending on pensions, healthcare, and long-term care, potentially doubling the debt-to-GDP ratio by 2050, write the IMF's Rahul Anand and Hoda Selim.    While Korea’s current fiscal position is strong, policy changes are essential. Reforms to boost growth—such as AI adoption and higher labor force participation—would create more room in the budget to support the elderly. And fiscal measures like broadening the tax base, streamlining spending, and further pension reform can help safeguard government finances.  Read the Article COUNTRY FOCUS Steering Nepal's Economy Amid Global Challenges "While global economic prospects remain dim amid uncertainty, Nepal gives reason for hope," IMF’s Asia-Pacific Director Krishna Srinivasan and Nepal Mission Chief Sarwat Jahan write in a Country Focus article.    Supported by an IMF-backed reform program, Nepal has made notable progress in restoring macroeconomic stability. Real GDP growth has risen from around 2 percent in 2023 to an estimated 4.3 percent in 2025. Foreign exchange reserves have strengthened, public debt has stabilized, and inflation remains contained.    However, challenges remain. Economic gains have yet to translate into broad-based job creation. The recent youth-led protests underscored aspirations for greater transparency, governance and a more equal distribution of economic opportunities and resources. This yearning resonated in Nepal and beyond.    "The country faces a challenging transition, but it can make the most progress if the people work together," the authors note.  Read the Article F&D MAGAZINE Why Civilizations Flourish—and Fail (Credit: Max Drekker) Ninth century Baghdad, seat of the Abbasid Caliphate, was designed as a perfect circle to honor the Greek geometer Euclid. The empire, enriched by trade in goods and ideas, sponsored an ambitious translation movement to collect the accumulated knowledge of the many cultures it interacted with.   This open mindset is one of the keys to the success of seven great civilizations spanning two and a half millennia, Johan Norberg writes in F&D. The practical lessons of these cultures could not, he says, be more important today as countries choose once again to wall themselves off—physically, economically, digitally, and from new ideas.   "The most secure and prosperous societies did not hide from the world. They were confident enough to remain open to trade and ideas, allowing the new to challenge the known," he added.  Read the Article CALL FOR PAPERS Rethinking MENA Integration in a Fast-Changing Global Environment The 2026 IMF MENA Research Conference will be held at Mohammed VI Polytechnic University in Rabat, Morocco on June 29-30, 2026.   The conference will bring together academics and policymakers to explore how the region can respond to external shocks through macroeconomic and financial policies; harness digitalization and AI to boost productivity and regional connectivity; and mobilize energy and infrastructure investment to support growth.   The Program Committee welcomes empirical and theoretical work focusing on the MENA region or contributions with a global or emerging market and developing economies perspective that have implications for the MENA region. A selection of the papers presented at the conference will be published in a special issue of Emerging Markets Review.   The deadline for submissions is March 31, 2026. Learn More RESEARCH IMF Research Perspectives The latest issue of the IMF Research Perspectives in now online! Articles featured in this issue focus on the accumulation of factors of production, such as labor and capital; the efficiency with which these are used; and innovation, which drives technological progress and ultimately underpins long-term growth. Explore the Issue Thank you 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.  Noha Elbadawy  Editor | IMF Weekend Read   nelbadawy@IMF.org Stay connected with the International Monetary Fund:       This email was sent to politikimx@gmail.com on behalf of: International Monetary Fund 1900 Pennsylvania Ave NW · Washington, DC · 20431

KOREA As Korea Ages, Fiscal Reforms Can Help Safeguard Government Finances (Credit: iStock by Getty Images)  Korea’s population is aging faster than almost any other country. That’s because people live longer than in most other countries, while the birth rate is one of the lowest in the world.   About one-fifth of the population is 65 and older, more than triple the share in the 1990s. This matters because older people tend to consume less, which can have wide-ranging economic effects, especially as the pace of population aging accelerates and birth rates do not improve, eventually leading to population decline. We estimate that every 1 percent decline in Korea’s population will reduce real consumption by 1.6 percent.   Korea has ample room to meet its current spending needs and respond to unforeseen shocks, with central government debt below 50 percent of gross domestic product. However, age-related government spending pressures are likely to rise significantly in coming years. That would substantially reduce fiscal space unless policymakers implement reforms.   We estimate spending on pensions, health care, and long-term care will rise by 30 to 35 percent of GDP by 2050 depending on alternative estimates for long-term spending by different institutions. However, under our baseline scenario—which includes lower potential economic growth due to aging and no measures to offset this, the debt ratio could reach 90 to 130 percent by 2050 depending on the spending estimate used, increasing risks to long-term debt sustainability. Structural reforms that maintain potential growth—such as those from AI adoption, greater labor force participation and more efficient resource allocation—would create more fiscal room for Korea to support elderly individuals. However, given high risks and uncertainty around the growth impact of reforms, even with these reforms, debt could still exceed 100 percent of GDP.   In addition to structural reforms, we also recommend fiscal reforms to help create more room in the budget to meet higher spending without putting pressure on public finances.   Greater efficiency   Raising additional revenue will be particularly helpful. In addition to recent changes, such as reversing some corporate tax cuts, policymakers could reconsider existing personal and corporate tax exemptions and simplify them where appropriate. Reviewing and adjusting certain exemptions for value-added taxes, which have increased, could also help. Similarly, reducing inefficient spending, including streamlining of support for local governments and small- and medium-sized enterprises, could help create space. Over the long term, making government spending more efficient will help boost the economy’s productive capacity.   To reduce the long-term spending pressures, furthering pension reform remains important. Parliament recently strengthened the finances of the National Pension Service, raising contribution rates to delay future losses. Additional reforms should aim to keep the system sustainable while ensuring fair and adequate benefits.   Finally, adopting a clear and credible quantitative fiscal limit to guide policies to reach fiscal objectives, supported by a stronger medium-term fiscal framework, would help keep government finances stable over the long term while still allowing fiscal policy to respond to shocks when needed. Moreover, the medium-term framework could forecast and incorporate expected spending on aging, making fiscal policy more predictable and transparent. This could be reinforced by even longer-term strategies that account for future spending pressures and propose options to finance them.   *****   Rahul Anand is an assistant director in the Asia-Pacific Department, where Hoda Selim is a senior economist. Related Links Korea and the IMF Press Release We'd love to hear your thoughts and suggestions. Feel free to contact us.   Peter Walker  Managing Editor | IMF Country Focus  pwalker@IMF.org Stay connected with the International Monetary Fund: