ΙΜF,update

 

Dear MARIA, In today's edition, we highlight: China's economy Georgieva on global economic cooperation AI and the Next Economic Downturn Energy security in Europe New F&D coming soon, and much more

CHINA Growth Outlook Brighter, but Challenges Remain (Credit: IMF Photo/Raul Ariano) China's economic development over the past few decades has been remarkable, but these achievements have been accompanied by imbalances and headwinds to growth have emerged, said IMF First Deputy Managing Director Gita Gopinath in a press conference on China’s Article IV consultation. “The authorities recognize these challenges and are focused on achieving high quality growth,” said Gopinath. “In our view, a more comprehensive policy approach would help China navigate the headwinds facing the economy.” The Fund projects that China's economy will grow by 5 percent in 2024 and 4.5 percent in 2025. This reflects upward revisions of 0.4 percentage points for both years compared to the April World Economic Outlook projections, driven by a strong first quarter GDP growth in 2024 and recent policy measures. The ongoing housing market correction, necessary for steering the sector towards a more sustainable path, must continue, said Gopinath, welcoming measures the authorities have implemented to guide the property market transition, including recent policy announcements regarding lending support for affordable housing.

ΙΜF Podcast

 

(Photo: ANDRE M. CHANG/ZUMAPRESS/NEWSCOM) Nigeria’s eNaira was the first Central Bank Digital Currency in Africa and only the second in the world when it launched in October 2021, but a growing number of countries across the globe are now planning to follow suit with their own CBDCs. What can they learn from Nigeria’s experience? Jookyung Ree is an economist in the IMF African Department and assigned to Nigeria when the CBDC was introduced. Ree has since studied its impact on the economy and found that existing mobile money networks are proving a challenge to the eNaira’s adoptability. In this podcast, Ree says the eNaira will need to complement mobile money systems to convince more Nigerians to use it.   Read the paper   Listen to the podcast on: IMF.org | Apple Podcasts | Spotify | Libsyn |  Soundcloud | Google Podcasts   Read the transcript     Thanks for listening to the podcast. We're always looking to improve your experience so let us know if you have any suggestions! Send your comments to me at bedwards2@imf.org.   Bruce Edwards Producer, IMF Podcasts

ΙΜF COUNTRY FOCUS

Libya After a Decade-Long Hiatus, IMF Surveillance Resumes in Libya Photo Credit: Cinoby/iStock by Getty Images By the Libya team, IMF Middle East and Central Asia Department Libya has been mired in conflict and political uncertainty since the fall of the Ghaddafi regime in 2011. Until recently, the country’s fragmentation hampered policymaking and the collection of key economic data. However, the country has made significant efforts to move forward and overcome the economic challenges brought by political conflict. As Libya paves the way for its economic recovery, it has made recent improvements in data collection, sharing, and transparency that have enabled the IMF to resume its surveillance after a decade-long hiatus.

INTERNATIONAL MONETARY FUND update

 

Dear maria, We just published a new blog—please find the full text below.  How Blended Finance Can Support Climate Transition in Emerging and Developing Economies (Photo: Adobe Stock) By Bo Li, Fabio Natalucci, and Prasad Ananthakrishnan Emerging market and developing economies account for two-thirds of global greenhouse gas emissions, and many are highly vulnerable to climate hazards. These economies will need significant financing in coming years to reduce emissions and adapt to the physical effects of climate change. Many also have high debt and constrained budgets because of the pandemic and face higher government borrowing costs amid rising interest rates around the world, making it especially difficult for public finance to meet pressing climate financing needs. These factors mean mobilizing private capital on a large scale will be key to achieving their climate objectives. Financial markets alone can’t do the job, but combining public and private capital offers unique advantages by reducing investment risk and attracting greater funding. Multilateral development banks and international financial institutions can provide support through creating blended financing structures to alter the risk-return profile for the climate transition in emerging economies

ΙΜF interesting latest news

 

Dear maria, We just published a new blog—please find the full text below.  Personal Income Tax Has Untapped Potential in Poorer Countries (PHOTO: VLAD_KARAVAEV/ISTOCK BY GETTY IMAGES) By Dora Benedek, Juan Carlos Benítez, and Charles Vellutini Many governments aiming to achieve a durable economic recovery from the pandemic must raise significant amounts of revenue in the fairest way possible. The personal income tax—levied on wages, salaries, and other income—is a suitable instrument for this challenge. In new research, we examine the scope for making greater use of this fiscal tool in developing countries, where many people earn a living at low incomes. Still in its infancy, but growing The personal income tax had become the predominant tax by the eve of World War II in many advanced economies, where it now raises approximately 9 percent of gross domestic product. In addition to bringing in revenue, it is progressive—imposing steeper rates on those with a higher income—and reduces inequality measurably. In most emerging market and low-income countries, on the other hand, such taxes are still in their infancy. Revenue from this source averages only 2.5 percent of GDP in these countries, in part because of their narrow tax base, and it does little to lessen inequality. But gradual changes have been taking place. In the two decades preceding the pandemic, income tax revenue more than doubled in low-income countries, rising from the equivalent of 1 percent of GDP to 2.1 percent, while emerging markets saw an increase from 2.1 percent to 3.1 percent. These were also reflected in share of the tax in overall tax intake, which went from 5 percent to 8 percent of total tax revenue in low-income countries and from 9 percent to 11 percent in emerging markets. Our research on this progress focuses on three questions: what drives personal income tax growth, how increases affect total revenue performance, and how these levies influence income redistribution. Our findings hold important lessons for developing countries, particularly as they grapple with the post-pandemic challenge of building the capacity to raise more tax revenue. What drives revenue growth? In examining the progress of the personal income tax in developing countries, we distinguish between observable tax policy changes and broader economic changes. Policy changes have targeted top and bottom statutory rates as well as the level of exempt income. Remarkably, we find that this hasn’t contributed much to the increase in revenue in low-income countries. And in emerging market economies, this shift has sometimes actually reduced revenue. This is the case in part because many emerging markets have introduced flat tax systems with low rates and those with progressive schedules have reduced rates over the last two decades. Economic variables, on the other hand, played a very important role. We looked at increases in per capita incomes and the size of the public-sector wage bill and the reduction in the size of the informal sector, as measured by the share of self-employed workers in the labor force and the share of agriculture in the economy. These developments have clearly been the driving force behind the growth in personal income tax revenues. As economies develop, we can expect this tax to take on greater importance. Improvements in tax administration also potentially play a role in boosting revenues, though that also extends to other taxes. Moreover, the accelerated shift into digitalized services because of the pandemic can pave the way for better income tax design and enforcement. What about the redistributive impact of the income tax in developing countries? To explore this, we separate the effects of policy design from the size of the population covered by the tax. Interestingly, the design of this tax in low-income countries is typically progressive; it is instead the narrow coverage that makes the overall contribution to redistribution very small compared to that seen in advanced economies. In emerging markets, however, it’s not progressive. It would seem, then, that there is significant potential to improve inclusion in this latter group of countries (several of which have a flat income tax). Is there scope to increase personal income tax revenue in the post-pandemic recovery? To answer this question, we look at how additional revenue is raised from alternative sources. Here again, there is a large difference between advanced economies, where additional revenue is predominantly sourced from the income tax, and low-income countries, where it plays a much more modest role. Other taxes will likely have to play a significant role, therefore, in raising revenue over the medium term, with the value-added tax and other indirect taxes remaining the main contributors. But income taxes can still be important for inclusive growth if properly designed and revenues well spent. Our research—together with the history of the tax in advanced economies—shows that the personal income tax should evolve into a more significant source of revenue as countries develop.     Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org   Thank you again for your interest in IMF Blog. Read more of our latest content here. Take good care!

Prakash Loungani profiles Chicago’s Marianne Bertrand, an advocate for inclusive growth.

Dear maria, Last December, there were news reports that a Black woman, Tenisha Tate-Austin, had the appraised value of her home raised by half a million dollars by having a white friend pretend to own it. When I mentioned this to an economist friend, he shrugged and simply said, “Bertrand and Mullainathan.” He didn’t need to say more: he was citing one of the most famous papers in economics of the past two decades, a 2004 study by Marianne Bertrand and Sendhil Mullainathan, both currently professors at the University of Chicago’s Booth School of Business. They sent nearly 5,000 fictitious resumes in response to job ads in Boston and Chicago and found that Black-sounding names, such as Lakisha, were 50 percent less likely to get a callback than white-sounding names, such as Emily, even though the resumes had been rigged to be alike in qualifications. It was difficult to attribute the result to anything other than explicit prejudice or unconscious bias. It’s one of several papers that have cemented Bertrand’s reputation for documenting why so many, such as women and minorities, do not do as well as they deserve, while some, such as top CEOs, are paid a lot more than they deserve. In an article for the March issue of F&D Magazine, the IMF's Prakash Loungani profiles Marianne Bertrand. Read the full article Recently Published: F&D March Issue "Rethinking Fiscal" In our March 2022 issue of F&D Magazine, published last week, we focus on “Rethinking Fiscal: Public Finance and Fairness in a Changed World”. The pandemic underscored the importance of fiscal policy in saving lives and livelihoods. Now, governments face the tricky task of returning debts to sustainable levels, even as the war in Ukraine riles world markets. In this issue, a lineup of accomplished authors provide insight and analysis on some of the biggest issues policymakers face when it comes to fiscal policy ranging from debt to institutional frameworks to taxation. In addition, we have complementary podcasts, videos, and other multimedia elements to stimulate your thinking. Want to get a print copy delivered to your home or office? Click here to subscribe. Nick Owen Senior Editor F&D Magazine nowen@IMF.org

IMF interesting latest news

 

The latest IMF analysis of global economics, finance, development and policy issues shaping the world //

Dear maria, Welcome to the Weekend Read! In today's edition we explore, among other things, why in some countries there are a lot of jobs but not enough workers, more detail on a new IMF trust fund, how the IMF is adapting to new challenges, what makes for a happy society, how economists can use strategic foresight, and the outlook for fragile and conflict-affected economies. **We want your input on the issues and trends economists and policymakers should be watching in 2022. Feel free to drop us a note.** Labor (Photo: Richard B. Levine/Newscom) Solving the Jobs Mystery In some countries, jobs are plentiful yet workers are scarce. A new blog by the IMF's Carlo Pizzinelli and Ippei Shibata explains why this phenomenon is playing based on data from the United States and United Kingdom. What their research found is that older workers leaving the workforce, the difficulty mothers of young children are facing with childcare and school interruptions, and a mismatch between the jobs available and those that people want are driving the trend. What's not having a major contribution is generous income support programs in response to the pandemic. --Why it's important: This employment gap, if it is persistent or widens further, could have major implications for growth, inequality, and inflation. A continued sluggish employment recovery amid sustained labor demand could constrain economic growth while fueling wage increases. While higher wages would be good news for workers, they could further fuel inflation. One common thread is that job vacancies and voluntary quits in the US and UK are highest among so-called low-skill occupations. While it remains to be seen how widespread and persistent this phenomenon will be, these facts hint at a possible change in worker preferences triggered by the pandemic. --Calling it Quits: The leading contributor to the employment gap in both the US and UK, accounting for around 35 percent of the outstanding employment gap versus pre-pandemic levels, is older workers leaving the labor market. It’s unclear how many of those who retired or quit may eventually return to work. Resilience and Sustainability (Image: Rose Kouwenhoven/IMF) A New IMF Trust Fund The IMF's Ceyla Pazarbasioglu and Uma Ramakrishnan laid out in a new blog this week how a proposed IMF Resilience and Sustainability Trust (RST) will help low-income and vulnerable middle-income countries build resilience to balance of payment shocks and ensure a sustainable recovery. The $50-billion trust fund would also be a place where countries could channel their Special Drawing Rights to more vulnerable nations. --Key design features: About three quarters of the IMF's membership would be eligible for RST financing. This would include all low-income countries, all developing and vulnerable small states, and all middle-income countries with gross national per-capita income of less than roughly $12,000 per year. The RST aims to address macro-critical longer-term structural challenges that entail significant macroeconomic risks to member countries’ resilience and sustainability, including climate change, pandemic preparedness, and digitalization. Access to RST financing would be determined case by case, based on the strength of reforms and debt sustainability considerations, and is expected to be capped at 150 percent of IMF quota or SDR 1 billion, whichever is smaller.  --Timeline: Pazarbasioglu and Ramakrishnan said they hope for broad support from IMF membership and international partners. The aim is to secure IMF Executive Board approval before the upcoming Spring Meetings and for the trust to become fully operational before the year’s end. Global Challenges (Image: Rose Kouwenhoven/IMF) The IMF Meeting Global Challenges From COVID-19 and climate change to digitalization and diverging demographics, the IMF’s member countries are confronting new challenges. In a new blog, the IMF's Sanjaya Panth and Ceyla Pazarbasioglu explain how the Fund is revisiting its policy advice, lending activities and capacity building to meet the evolving needs of its membership. The IMF's financing tools have modernized over time. To help countries address short-to-medium-term challenges emerging from the pandemic and beyond, the Fund will continue to deploy its traditional toolkit of surveillance, lending and capacity building, though minor modifications may sometimes be necessary.  Increased surveillance and lending focus on longer-term issues is also critical at the current juncture. Deep-seated structural issues are becoming much more prevalent in today’s world; they should be addressed now to prevent larger and more painful balance of payments problems in the future, the authors write. F&D (Photo: Sofia Busk/IMF) A Life Well Lived Denmark, Costa Rica and New Zealand stand out as three countries that are getting something right when it comes to maintaining the health and happiness of their citizens. In an article in our latest issue of Finance & Development, we look at what sets these countries apart in terms of effectively delivering services at the community level, cultivating social trust, and accounting for well-being at the highest policy level. Living amid the despair caused by a global pandemic has taught us that happiness, as we know it in its many forms, is important for the functioning of societies. Read the entire article. Check out our December Issue of Finance & Development.  Want to get a print copy delivered to your home or office? Click here to subscribe.     World Economic Outlook The IMF will release its update to the World Economic Outlook on Jan. 25 at 9 a.m. ET. The release will be accompanied by a press conference with the IMF's Gita Gopinath, Petya Koeva Brooks and Malhar Nabar.    (Photo: IMF)   IMF Market Insights Digitalization is changing our understanding of what “money” is and how it operates. Join the IMF’s Tobias Adrian at the 2022 MyFintech Week where you’ll hear more from him on central bank digital currencies. Sign up for the IMF's Market Insights, the IMF’s platform for analysis on global financial markets and related work    (Photo: IMF)   Essential Reading: Risk Management Check out our eLibrary section on risk management, where you can find all the latest IMF research on issues related to cybersecurity, finance and business, insurance, and risk modeling. Quote of the Week "Mitigating economic risks from long-term structural challenges requires a consistent and deliberate approach, with strong commitment from policymakers to undertake sometimes difficult reforms." —The IMF's Ceyla Pazarbasioglu and Uma Ramakrishnan in a blog on the proposed new Resilience and Sustainability Trust. WEEKLY ROUND-UP 01. Global Economic Outlook IMF Managing Director Kristalina Georgieva on Friday discussed the impact of the ongoing pandemic, rising debt levels, inflation and other issues during a World Economic Forum panel discussion on the global economic outlook. She stressed that in 2022, policymakers’ new year’s resolution should be "flexibility" as they face a tough obstacle course over the coming year. Watch the event with Christine Lagarde, Haruhiko Kuroda, Sri Mulyani Indrawati, and Paulo Guedes. 02. The Global Recovery in 2022 The IMF's Ceyla Pazarbasioglu this week discussed the global recovery amid diminished policy support, new COVID variants, continuing supply chain disruptions, increasing inflation, and rising debt burdens in many countries. The event hosted by the Center for Global Development also featured Ayhan Kose, Hanan Morsy, and Liliana Rojas-Suarez. 03. Strategic Foresight for Economists Strategic foresight (SF) is the systematic exploration of multiple plausible futures to inform present decisions. The IMF’s Alberto Behar and Sandile Hlatshwayo have published a note on why SF should be part of the economist’s toolkit and document the IMF’s experience with the methodology. Foresight is especially valuable when traditional risk analysis and model-based forecasting approaches have their limits (e.g., contexts with elevated uncertainty or structural breaks) and includes a range of complementary tools. At the IMF, foresight has palpably influenced strategy and operations (e.g., the Comprehensive Surveillance Review, creation of the Catastrophe Containment and Relief Trust, and responding to the COVID-19 crisis). It has also informed broader institutional contingency planning and crisis response preparedness in the current environment of heightened economic uncertainty. Fragile and conflict-affected states already confronted some of the greatest challenges among the world’s economies even before the pandemic. Our latest Chart of the Week from the IMF's Franck Bousquet illustrates how the pandemic exacerbated income divergence between these economies and the rest of the world. Per capita incomes in fragile states won’t recover to near their 2019 levels until 2024, IMF projections show. While each is different, fragile states typically have reduced institutional capacity and provide limited services for the population. They’re also characterized by limited ability to manage or mitigate social, economic, political, security or environmental risks. Conflict-affected states have active armed violence leading to civilian or military deaths. Adam Behsudi Editor IMF Weekend Read abehsudi@IMF.org   P.S. Be sure to let us know what issues and trends we should have on our radar as we launch into 2022. The divergence between these countries and the rest of the world is at risk of widening. Dear maria, We just published a new blog—please find the full text below. Fragile and Conflict-Affected Economies Are Falling Further Behind (Image: ERHUI/iStock by Getty Images) By Franck Bousquet Even before the pandemic, fragile and conflict-affected states (FCS) already confronted some of the greatest challenges among the world’s economies. While not all FCS face active conflict, most are at risk: global levels of violence are at a 30-year high and more than 80 million people had been forcefully displaced prior to the discovery of the coronavirus. Now, the continuing pandemic poses a significant risk that the divergence between these countries and the rest of the world will widen—and persist. The chart of the week illustrates how the pandemic exacerbated income divergence between these economies and the rest of the world. Per capita incomes in fragile states won’t recover to near their 2019 levels until 2024, IMF projections show; and by then, the gap with pre-crisis per capita income trends is set to remain larger for FCS than for other countries. These dimming prospects may be difficult to reverse because fragility and conflict interact with—and are often exacerbated by—global trends such as climate change, soaring food prices and gender inequality. The IMF classifies more than 40 economies as fragile and conflict-affected. Examples include Libya, Yemen, Chad, Democratic Republic of Congo, Somalia, Haiti and Papua New Guinea. Fragile states are already home to nearly 1 billion people and are on course to be home to 60 percent of the world’s poor by 2030 . While each is different, fragile states typically have reduced institutional capacity and provide limited services for the population. They’re also characterized by limited ability to manage or mitigate social, economic, political, security or environmental risks. Conflict-affected states have active armed violence leading to civilian or military deaths. In these vulnerable economies, slower recovery has followed an especially hard hit from the pandemic. Their per capita gross domestic product contracted 7.5 percent last year amid increased political tensions, limited policy options to respond to the pandemic, lockdown and other steps to contain the virus, and volatile oil prices. In addition, debt and inflation pressures are mounting. Compared to pre-pandemic projections, public debt rose by 17 percentage points to 78 percent of gross domestic product in 2020, IMF research shows. Fragile states also saw consumer prices surge 9 percentage points above their pre-pandemic projections. Food inflation particularly exacerbates food security challenges and is reversing past progress. Global food prices rose 23.1 percent last year, according to the United Nations Food and Agriculture Organization. Together, these challenges underscore how fragile states risk falling even further behind the rest of the world—and why supporting them, more than ever, must be an international priority. ******   We Want To Hear From You! Click here for a 3-question survey on IMFBlog. Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org   Thank you again for your interest in IMF Blog. Read more of our latest content here. Take good care!