International Monetary Fund:Weekend Read: Europe Needs a Coordinated Approach to Industrial Policy..

 

Dear MARIA, In today's edition, we highlight: Europe needs a coordinated approach to industrial policy Why Latin America needs lower deficits and stronger fiscal rules Foundation for human flourishing December 2024 F&D magazine Rose Ngugi on how indices are giving Kenya an edge, and more

GOVERNMENT SUBSIDIES Europe Needs a Coordinated Approach to Industrial Policy  (Credit: Tramino/iStock by Getty Images) Industrial policy is having a moment in Europe, as countries increasingly turn to sectoral policy interventions to address the challenges of geopolitical fragmentation and economic security, enhance productivity, and accelerate the green transition, write the IMF’s Alfred Kammer, Andrew Hodge, and Roberto Piazza in a new blog. State aid spending by European Union countries has tripled in the last decade, reaching 1.5 percent of GDP. As the recent report from Mario Draghi suggests, there is a growing consensus that even more such spending is necessary to spur growth. But before rushing ahead, it is important to take stock. A new IMF working paper shows that the success of industrial policy depends not just on how much is spent, but on spending it well: targeting the right priorities and avoiding costly missteps. Europe’s industrial policies need a unified, coordinated framework, the authors write. When countries align their efforts, the benefits of industrial policy can outweigh the costs. Coordinated policies preserve the gains from trade, ensure a level playing field, and make full use of the EU’s single market. The blog is based on the IMF Working Paper “Industrial Policy in Europe: A Single Market Approach”, by A. Hodge, R. Piazza, F. Hasanov, X. Li, M. Vaziri, A. Weller, and Y.C. Wong.

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Dear MARIA, We just published a new blog—please find the full text below.  Europe Needs a Coordinated Approach to Industrial Policy (Credit: Tramino/iStock by Getty Images) By Alfred Kammer, Andrew Hodge, and Roberto Piazza Industrial policy is having a moment in Europe, as countries increasingly turn to sectoral policy interventions to address the challenges of geopolitical fragmentation and economic security, enhance productivity, and accelerate the green transition. State aid spending by European Union countries has tripled in the last decade, reaching 1.5 percent of GDP. Much of this aid flowed into green technologies and energy efficiency, with major economies like France, Germany, Italy, and Spain driving the surge. As the recent report from Mario Draghi suggests, there is a growing consensus that even more such spending is necessary to spur growth.

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(Credit: IMF Photo) While housing markets play a significant role in economies, new research shows houses across 40 countries are less affordable than at any time since the 2008 financial crisis. IMF economist Deniz Igan helped develop the Housing Affordability Index. In this podcast, she says the pandemic triggered an unusual sequence of events that housing markets around the world are still struggling to correct.  Read the article in the IMF's Finance and Development Magazine:   The Housing Affordability Crunch Deniz Igan A newly developed dataset shows how the pandemic’s aftermath ushered in the worst housing affordability crisis in more than a decade     Listen to the podcast on: IMF.org | Apple Podcasts | Spotify | Soundcloud | YouTube   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

IMF Weekend Read

 

Dear MARIA, In today's edition, we highlight: IMF Deputy Managing Director Nigel Clarke in Kenya Relentless reformer: Sri Mulyani Indrawati December 2024 F&D magazine Deniz Igan on the housing affordability crunch IMF Publications survey, and more SUB-SAHARAN AFRICA Kenya Can Move the Economy Forward and Strengthen Public Trust, Says Clarke (Credit: Melissa Lyttle/IMF Photo) During his visit to Kenya, the IMF's Deputy Managing Director Nigel Clarke encouraged further efforts to create fiscal space for priority investment and social spending. In a statement, Clarke also said it was critical to spend public revenue wisely. How? "By strengthening public financial management, governance, transparency, and anti-corruption frameworks.”

IMF update

 

Dear MARIA, We just published a new blog—please find the full text below.  Breaking Latin America’s Cycle of Low Growth and Violence (Credit: Syldavia/iStock by Getty Images) By Ilan Goldfajn and Rodrigo Valdés Violent crime and insecurity have a disproportionate impact on Latin America and the Caribbean, with severe consequences for socioeconomic development. Despite representing just 8% of the world’s population, the region accounts for nearly one-third of global homicides. This as well as other alarming statistics highlight the urgent need for comprehensive strategies to address the far-reaching effects of crime and violence. New research by the IDB and IMF highlights how crime, insecurity and low growth reinforce each other in a vicious cycle that stifles investment, reduces tourism, and accelerates emigration. Macroeconomic instability—recessions, inflation spikes, and rising inequality—is associated with increased violence. Easily available firearms and organized crime amplify these effects, undermining institutions and the rule of law. Quantifying the Costs of Crime

IMF Blog...update

 

Dear MARIA, We just published a new blog—please find the full text below.  Persistent Fall in Private Borrowing Brings Global Debt Down (Credit: Fang Xia Nuo/iStock by Getty Images) By Vitor Gaspar, Carlos Gonçalves, and Marcos Poplawski-Ribeiro Global debt decreased about one percentage point to 237 percent GDP. The values for 2023 are now available from the just released IMF’s Global Debt Database. Global private debt fell by 2.8 percentage points to 143 percent of GDP, below the 2019 level and more than compensated for the turning up in public debt. According to the latest Fiscal Monitor, global public debt is high, rising, and risky.

IMF update

 

Dear MARIA, We just published a new blog—please find the full text below.  Housing’s Unique Role in Lives and Economies Demands Greater Understanding (Illustration by Cristiana Couceiro) By Gita Bhatt Wherever I go these days, the conversation inevitably focuses on the rising cost of housing. The concerns span generations, locations, and income levels. Young people may be the most disillusioned as they see their ability to buy or rent diminished just as they plan to start families. The causes are complex and varied, but the stakes are unambiguous: shelter means stability, security, and a sense of belonging. It is an essential part of well-being and a recognized human right.

ΙΜF update

 

Vanuatu How Vanuatu Can Return to Sustainable Growth After Airline Bankruptcy (Credit: Samantha Bailey/iStock by Getty Images) Vanuatu, the Pacific archipelago nation of about 350,000 people between Australia and Fiji, finds itself at a crucial crossroads. The IMF’s recent staff report on Vanuatu reveals an economy grappling with a series of shocks: two destructive tropical cyclones last year; the fallout from the effective bankruptcy of its national airline, Air Vanuatu; and the challenges brought about by declining proceeds from its Economic Citizenship Program, or ECP, the nation’s citizenship-by-investment plan. The current headwinds are not new, but rather, long-term adverse risks that finally have materialized. Air Vanuatu’s financial and operational weaknesses preceded the pandemic and culminated with the company’s bankruptcy in May 2024—a blow to the island's connectivity and tourism industry, as well as its domestic and international labor mobility and cargo networks.

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.