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GREENER, SMARTER, FAIRER
"One hundred and seventy countries are going to finish this year with a smaller economy than at the start of the year, and we already project that there will be more debt, bigger deficits, and more unemployment," said Managing Director Kristalina Georgieva this week to 225,000 live participants of the Great Reset Dialogue hosted by the World Economic Forum. "And there is a very high risk of more inequality and more poverty. Unless we act." Read her remarks, which focus on how we can build a greener, smarter, and fairer world coming out of the crisis.
In pursuit of a greener future, we must better understand the connection between climate change and the financial system. Case in point: the IMF’s latest Global Financial Stability Report examines the impact of climate change physical risk (loss of life and property as well as disruptions to economic activity) on financial stability, and finds that equity investors might not be pricing these risks adequately. In a new blog, the IMF's Felix Suntheim and Jérôme Vandenbussche dig into why.
It's also important to note that in the June 2020 Sub-Saharan Africa Regional Economic Outlook, published yesterday, we show that climate change is increasing food insecurity. More broadly, adapting to climate change will cost sub-Saharan Africa US$30 billion to US$50 billion per year for the next ten years. But in a new blog, the IMF's Pritha Mitra and Seung Mo Choi say the cost of not acting is far greater. Prefer a podcast? Listen here (14 min).
We've been thinking about the impact of a warmer world for some time, and since today is World Environment Day, I wanted to point you to a recent roundup of our climate change research, and a recent issue of Finance & Development magazine focused on the economics of climate change.
THE GLOBAL ECONOMY
For an in-depth look at the state of the global economy today and how the IMF is continuing to respond to the pandemic, I encourage you to watch Managing Director Georgieva's recent video interview with the Washington Post's David Ignatius. The discussion focused on inequality, debt relief and suspension, reopening and much more. Read the full transcript here.
If you're interested in getting even further in the weeds, carve out some time to watch our Chief Economist Gita Gopinath discuss the Great Lockdown in great detail—with a slew of charts and other visuals to bring this story to life. You can also download her slides (start from page 16).
Speaking of the Great Lockdown, what about countries that never closed? The IMF's Sweden team recently explained that the merits of Sweden’s strategy to contain COVID-19—which is based more on recommendations and social responsibility than legal obligations—are increasingly attracting attention, both from a health and an economic perspective.
EMERGING MARKETS IN CRISIS
"Economic activity in emerging markets has decelerated at a pace unseen in at least 50 years as the impact of the COVID-19 pandemic ravages the global economy," writes the IMF's Martin Mühleisen, Vladimir Klyuev, and Sarah Sanya in a new blog about policy responses in emerging markets to the crisis. If you're interested in learning more about how the pandemic is impacting financial conditions in emerging markets, read MD Georgieva's opening remarks to a recent UN event on Financing for Development in the Era of COVID-19.
In particular, emerging market economies in the Middle East and Central Asia are confronting one of the most severe and widespread crises ever, with a confluence of fast-moving shocks ranging from the COVID-19 pandemic to financial market volatility, a plunge in oil prices, and domestic lockdown. The IMF currently expects this diverse group of economies—Armenia, Bahrain, Egypt, Georgia, Jordan, Kazakhstan, Lebanon, Morocco, Oman, Pakistan, Saudi Arabia, Tunisia, and the United Arab Emirates—to contract by 1.7 percent in 2020. Read this new op-ed by the IMF's Jihad Azour to explore these issues further.
If you would like to zoom in on the Middle East, set aside 1-hour to watch Azour's recent in-depth discussion, hosted by the Brookings Institution, on how COVID-19 and the oil shock will reshape the region.
Turning to sub-Saharan Africa, the IMF's Abebe Selassie recently provided a comprehensive tour of IMF emergency assistance to Africa during the COVID-19 pandemic. The two-hour discussion and Q&A, hosted by the World Bank, is chalk-full of insights into how the region is faring during the crisis, the role of debt and debt relief, and much more.
FLEXIBLE CREDIT FOR LATIN AMERICA
The IMF recently approved Flexible Credit Line ( FCL) requests from Chile (US$23.8 billion) and Peru (US$11 billion). Available to countries with a strong economic track record and policy frameworks, the FCL does not carry standard conditions, provides insurance against external shocks, and will help strengthen financial resilience while responding to the pandemic. Chile and Peru join Colombia and Mexico as recipients of this credit line, which altogether total about US$107 billion.
POLICIES, POLITICS AND PANDEMICS
Our summer 2020 issue of Finance & Development magazine, published this week, focuses on economic policymaking and politics through the lens of COVID-19. Harvard's Jeff Frieden, LSE's Andrés Velasco, and Richard Edelman examine the importance of institutions, identity, and trust, respectively. The IMF's Antoinette Sayeh and Ralph Chami weigh policy solutions as this crisis robs millions of migrants of work opportunities, slashing remittances, the single most important flow of income for many poor countries. Read the article or listen to the new podcast on this topic. In addition, six prominent thinkers including Daniel Susskind, Ian Bremmer and Sharan Burrow reflect on how the COVID-19 pandemic has changed the world. Interested in the full issue? Read it here.
IMF AND COVID-19
We just updated our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19, and we are regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMF’s Executive Board.
There are now 66 countries that have been approved to receive emergency financing, totaling about US$23.5 billion. Recent approvals include Bangladesh, Honduras, Sierra Leone, Barbados, Mongolia, and The Bahamas. If you're wondering how the IMF is helping ensure transparent and accountable use of COVID-19 financial assistance, read this fact sheet, and if you're looking for our latest Q&A about the IMF's response to COVID-19, click here.
We are also continually producing a special series of notes—more than 50 to date—by IMF experts to help members address the economic effects of COVID-19 on a range of topics.
Stay healthy and see you next week,
P.S. In non-COVID-19 related news, IMF authors Rasmané Ouedraogo and Amadou N. Sy just published a new working paper that found that an increase in digital adoption in Africa is associated with a reduction in the perception of corruption and an increase in trust in tax officials. However, the paper also shows that the dampening effect of digitalization on corruption is hindered in countries where the government has a pattern of intentionally shutting down the Internet.
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