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India’s Economy: Stamina Is The Name Of The Game

Posted on February 21, 2013 by iMFdirect

by Laura Papi and Rahul Anand*

So far 2013 has been a breath of fresh air in terms of economic news: financial markets have rallied and economic indicators have started to surprise on the upside. In India, the rupee has strengthened and the Bombay Stock Exchange index (Sensex) crossed the 20,000 mark for the first time in two years. Industrial production has started picking up.

So is India’s growth about to go back to 8-9 percent? The short answer is no. But we need to look back to understand why India’s growth has decelerated to a decade low and why the slump, which has hit investment particularly hard, has persisted for over a year. As structural problems are at the root of the slowdown, so structural reforms must be at the core of the solution.

Filed under: Economic Crisis, Emerging Markets, growth, IMF, International Monetary Fund | Tagged: cash transfers, economic growth, emerging markets, fiscal deficit, fuel subsidy spending, government deficits, IMF, iMFdirect, India, inflation, International Monetary Fund, investment, structural reforms | Leave a Comment »

Europe: Toward A More Perfect Union

Posted on February 15, 2013 by iMFdirect

By Nemat Shafik

During the years that followed the euro’s introduction, financial integration proceeded rapidly and markets and governments hailed it as a sign of success. The widespread belief was that it would benefit both south and north—capital was finally able to flow to where it would best be used and foster real convergence.

But in fact, a lasting convergence in productivity did not materialize across the European Union. Instead, a competitiveness divide emerged. As the financial crisis gripped the euro area in 2010, these and other problems came to the fore.

Three years later, the financial symptoms of the crisis are thankfully receding with a new sense of optimism in markets. But the underlying problems—lack of convergence of productivity and the structural flaws in the architecture of the monetary union—have only been partially addressed.

Filed under: Advanced Economies, Economic Crisis, Employment, Europe, Finance, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: central banks, emerging economies, euro zone, Europe, European Union, financial integration, fiscal integration, fiscal union, Germany, IMF, iMFdirect, International Monetary Fund, Italy, monetary union, productivity, Spain | Leave a Comment »

Resolutions for the Fiscal New Year—Staying on Track Is No Easy Task

Posted on February 4, 2013 by iMFdirect

by Carlo Cottarelli and Philip Gerson

Version in Español

We’re one month into 2013, and if past experience is any guide, by now many people will have all but forgotten the promises they made about the things they planned to do over the coming year.

It’s a time-honored tradition in many countries for people to make resolutions at the New Year, usually involving things that are good for them, like achieving a healthier weight. Unfortunately, it’s also traditional that these commitments quickly fall by the wayside, only to be taken up again next year, usually with the same results.

But unlike many of these resolutions, the ones made by most advanced economies to reduce their 2012 fiscal deficits were by and large kept. The average headline deficit in these countries fell by about ¾ percent of GDP last year, bringing the cumulative deficit decline to 3 percent of GDP since budget shortfalls peaked in 2009. This is good news.

Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Europe, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: advanced economies, deficit reduction, fiscal consolidation, fiscal policy, government debt, government spending, IMF, iMFdirect, International Monetary Fund, Japan, United States, United States Federal Reserve | 2 Comments »

Latvia’s Economic Potential: Recovery and Reforms

Posted on January 28, 2013 by iMFdirect

by David Moore

Latvia’s economy has attracted international attention out of all proportion to its size. Many observers know that Latvia returned to strong economic growth after a severe downturn in 2008 and 2009 and a tough austerity program. In late 2012, Latvia even repaid the IMF in full, several years early.

But the international consensus ends there. Critics of Latvia’s economic strategy point to continuing high rates of unemployment and poverty; advocates point to the benefits of frontloading spending cuts and tax increases to lay the foundations for recovery.

Filed under: Economic Crisis, Employment, Europe, Fiscal policy, Fiscal Stimulus, growth, IMF, International Monetary Fund | Tagged: credit, economic policy, economic reform, Economics, euro, growth, IMF, iMFdirect, International Monetary Fund, Latvia, poverty, unemployment, wages | 2 Comments »

We May Have Avoided the Cliffs, But We Still Face High Mountains

Posted on January 23, 2013 by iMFdirect

by Olivier Blanchard

Version in Español

Optimism is in the air, particularly in financial markets. And some cautious optimism may indeed be justified.

Compared to where we were at the same time last year, acute risks have decreased. The United States has avoided the fiscal cliff, and the euro explosion in Europe did not occur. And uncertainty is lower.

But we should be under no illusion. There remain considerable challenges ahead. And the recovery continues to be slow, indeed much too slow.

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Europe, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: banking union, Brazil, capital flows, China, debt, developing economies, emerging economies, euro area, Europe, European Central Bank, financial markets, fiscal cliff, fiscal consolidation, fiscal crisis, fiscal policy, France, Germany, government bonds, government debt and deficits, growth, IMF, iMFdirect, India, inflation, International Monetary Fund, Italy, Japan, Outright Monetary Transactions, Spain, United States, WEO, World Economic Outlook | 5 Comments »

The Ties That Bond Us: What Demand For Government Debt Can Tell Us About the Risks Ahead

Posted on January 17, 2013 by iMFdirect

by Serkan Arslanalp and Takahiro Tsuda

It’s not news that emerging markets can be vulnerable to bouts of market volatility. Investors often pull sudden stops—they stop buying or start selling off their holdings of government bonds.

But what has become apparent in recent years is that advanced economy government bond markets can also experience investor outflows, and associated runs. At the same time, some traditional and new safe haven countries have seen their borrowing costs drop to historic lows as they experience rising inflows from foreign investors.

Our new research shows that advanced economies’ exposure to refinancing risk and changes in government borrowing costs depend mainly on who is holding the bonds— the demand side for government debt.

Filed under: Advanced Economies, Asia, Emerging Markets, Europe, Finance, Financial Crisis, Financial regulation, Financial sector supervision, G-20, growth, IMF, International Monetary Fund | Tagged: advanced economies emerging economies, Australia, Austria, banks, Belgium, borrowing costs, Canada, debt, debt-to-GDP ratio, demand, Denmark, financial institutions, financial markets, Finland, France, Germany, government bonds, Greece, IMF, iMFdirect, International Monetary Fund, investors, Ireland, Italy, Japan, Korea, Netherlands, New Zealand, Norway, Portugal, refinancing risk, risk, Slovenia, sovereign risk, Spain, supply, Sweden, Switzerland, United States, World Economic Outlook | 4 Comments »

For Your Eyes Only: Three Jobs Not to Defer in 2013

Posted on January 2, 2013 by iMFdirect

By David Lipton

(Versions in عربي, 中文, Español, Français, Русский, 日本語)

With the New Year, we all hope to put the global financial crisis behind us. We also need to do more to secure our future.

Beyond our current economic and financial problems, there are long-term issues that we all know about, but that get too little attention in an era when policymakers are so fully engaged in slogging away at more immediate problems. Unfortunately, long-term issues unaddressed today will become crises tomorrow.

So we had better lengthen our focus, see what looms on the horizon, and do more to steer the global economy in a better direction.

Filed under: Economic Crisis, Economic outlook, Financial Crisis, Globalization, growth, Inequality, International Monetary Fund, Politics | Tagged: advanced economies, Climate change, crisis, David Lipton, developing economies, emerging markets, global economy, global warming, Globalization, growth, Hurricane Sandy, iMFdirect blog, structural reforms, technology | 7 Comments »

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India’s Economy: Stamina Is The Name Of The Game

Europe: Toward A More Perfect Union

Resolutions for the Fiscal New Year—Staying on Track Is No Easy Task

Latvia’s Economic Potential: Recovery and Reforms

We May Have Avoided the Cliffs, But We Still Face High Mountains

The Ties That Bond Us: What Demand For Government Debt Can Tell Us About the Risks Ahead

For Your Eyes Only: Three Jobs Not to Defer in 2013

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