IMF Weekend Read

 

Dear MARIA,   In today's edition, we highlight: World Economic Outlook Update FDMD Dan Katz on AI New chief economist Podcast on economic forecasting Tokenization in finance Trade cooperation in Gulf and Caucasus Video on the art of taxation ECONOMIC OUTLOOK World Economy Poised for ‘Modest Slowdown’  Global growth this year is likely to slow slightly more than previously projected, while the disinflation trend over the past two years has stalled, according to the World Economic Outlook Update, released on July 8th.    Growth is forecast decelerate to 3 percent, less than the 3.1 percent projection in the April WEO and slower than the 3.5 percent growth in each of the past two years. The estimate for global inflation this year was raised to 4.7 percent, an increase of 0.3 percentage points.    The “modest slowdown” in economic growth reflects the impact of the war in the Middle East being partly offset by a technology-driven investment boom, according to the WEO Update, which was released amid renewed escalation in the conflict.      Continuing hostilities could reignite commodity price volatility, tighten financial conditions, strain policy buffers, and worsen food insecurity in low-income countries. However, the report also projects global growth will rebound to 3.4 percent in 2027.    “The world economy has weathered the shock from the war better than feared,” said Petya Koeva Brooks, deputy director of the IMF Research Department, at a press briefing Wednesday. “A larger spike in oil prices was avoided thanks to inventory drawdowns, expanded production outside the gulf, and actions to help soften oil demand.”  Read the report LABOR Artificial Intelligence and the Economics of Adjustment  Will AI destroy jobs? In a new essay for Finance & Development, IMF First Deputy Managing Director Dan Katz argues that history offers grounds for optimism. From electrification to the internet, transformative technologies have provoked anxiety about the future of work, but ultimately expanded economic activity, creating new industries and opportunities.    The key challenge, Katz argues, is managing the transition. “The goal of policy should not be to protect specific jobs, companies, or industries.” Instead, governments should help workers and firms adapt through policies that support mobility, competition, and the efficient reallocation of capital.    For emerging market and developing economies, the stakes are especially high. AI offers a chance to leapfrog but also risks widening income gaps if countries are unprepared. The choices governments make now, Katz argues, will determine whether AI becomes a driver of shared prosperity or a source of deeper economic divides.  Read the F&D story IMF LEADERSHIP New IMF Chief Economist The IMF has appointed Silvana Tenreyro, a leading macroeconomist and former member of the Bank of England’s Monetary Policy Committee, as its next chief economist, effective August 10.     “Silvana is a globally respected economist who combines outstanding academic achievements with extensive policy making experience and a close engagement with leading international institutions,” IMF Managing Director Kristalina Georgieva said when announcing the appointment. Currently a professor at the London School of Economics, Tenreyro has conducted influential research on monetary policy, trade, inflation, economic volatility, growth, and resilience to shocks.     Tenreyro succeeds Pierre-Olivier Gourinchas, who has returned to academia after serving as the IMF’s chief economist since 2022.  Read the press release FORECASTING Understanding Global Economic Forces Forecasting is often judged by whether a number turns out to be right. But for former IMF chief economist Pierre-Olivier Gourinchas, the real value lies elsewhere. “A lot of forecasting isn't about the number,” he says. “It's really about the story.”   In a new IMF podcast, Gourinchas reflects on his time at the Fund, which was marked by inflation, trade tensions, geopolitical shocks, and the rise of AI. He explains why understanding the forces shaping the global economy—and the policy choices they demand—matters more than any single forecast. Listen to the podcast FINTECH Tokenization is More than Technology “Tokenization is often described as a technological upgrade, but it is a lot more,” says the IMF’s director of monetary and capital markets, Tobias Adrian, in a new IMF blog. He argues that the rise of tokenized finance could alter the foundations of modern financial markets. As assets move onto shared digital ledgers, processes that currently take days can be completed almost instantly through software-driven transactions.     The transformation promises lower costs, quicker settlement, and more efficient use of collateral. But it also removes some of the frictions that today provide safety buffers. Risks that once sat on institutional balance sheets may become concentrated in platforms, market infrastructure, and smart contracts, raising new questions for regulators and central banks.     Adrian explores how tokenized deposits, stablecoins, and central bank money could coexist in this new environment. His conclusion: the future shape of tokenized finance is not predetermined. It will be shaped by policy decisions made now on governance, oversight, interoperability, and the role of public and private money.   Read the blog MIDDLE EAST & CENTRAL ASIA  Untapped Gulf–Caucasus Trade  New IMF research finds that bringing logistics and governance standards in the Caucasus and Central Asia (CCA) closer to those of the world’s top performers could boost goods trade by about 150 percent and 120 percent, respectively.    The findings highlight significant untapped potential for deeper economic ties between the CCA and Gulf Cooperation Council (GCC) countries at a time of heightened global uncertainty, trade tensions, and geoeconomic fragmentation. While both regions remain major exporters of hydrocarbons, diversification is expanding non-oil trade. The GCC is typically a source of capital, while the CCA is a destination for investment, creating important complementarities.    Reforms to strengthen logistics, governance, trade policies, and cross-border payment systems could help unlock these gains, the paper argues. Trade and investment agreements could also reduce barriers, encourage foreign investment, and support growth and resilience across both regions. Read the paper FISCAL POLICY The Art of Taxation Tax too little and governments cannot fund schools, hospitals, or infrastructure. Tax too much—or tax poorly—and growth can suffer. Getting the balance right is harder than it sounds.     The IMF’s latest Analyze This video explains why taxation is as much an art as it is a science. Beyond the calculations and data, designing a tax system requires difficult tradeoffs between raising revenue, supporting economic activity, and advancing public priorities.   Watch the Video 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.  Peter J. Walker Senior Editor | IMF Weekend Read  pwalker@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