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Dear Colleague,

In today’s edition, we spotlight Kristalina Georgieva’s call for freer trade to ease the plight of the poor at the G20 summit in Bali, demographic challenges as the world’s population passes 8 billion, Costa Rica and climate change, global price pressures, sovereigns and banks, wage-price spirals, Haiti’s exchange rate, Guyana’s oil wealth, and much more.

P.S. The Weekend Read will be on holiday for Thanksgiving next week. The next edition will appear on Friday, Dec. 2.

Freer Trade Could Ease Plight of World's Poor

Why Countries Must Cooperate on Carbon Prices

(G20 INDONESIA MEDIA CENTER/M RISYAL HIDAYAT)

Removing trade barriers, especially for food and fertilizers, could go a long way to counter the suffering of hundreds of millions of people, Kristalina Georgieva said in a speech at the G20 leaders’ summit in Bali on Tuesday.

The IMF managing director said that COVID, the war in Ukraine and climate disasters on all continents have led to slower global growth, higher prices, tighter financial conditions and a rise in poverty and hunger.

“This is hard for everybody, but especially for emerging market and developing economies.”

The G20 could do a lot to improve the prospects for the world economy by removing trade barriers, lowering debt burdens and investing in resilience, Georgieva said.

“We must not allow protectionism to take root—and the world to drift into separate blocs.”

A divided world would lose at least 1.5 percent of GDP annually, and the cost would be twice as high for open economies that depend on international cooperation, according to calculations by IMF staff.

“We can turn the tide and prevent sleepwalking into a world that is poorer and less secure,” Georgieva said.

Kristalina Georgieva also gave a speech about global challenges to leaders of the Association of Southeast Asian Nations in Cambodia and spoke to Reuters about the costs of fragmentation.

Costa Rica Taps Climate Change Facility

(GETTY IMAGES/ESDELVAL)

Climate change poses acute risks to Costa Rica, with natural disasters subtracting half a percent from the Caribbean nation’s gross domestic product every year for the past three decades and adding to budget pressures.

This week Costa Rica became the first country to benefit from the IMF’s Resilience and Sustainability Facility to support long-term reforms to strengthen climate resilience. In a Country Focus interview, Costa Rica’s finance minister, Nogui Acosta Jaén, said the new program would help the country to assess the risks climate change poses to public investment projects and mitigate costs over the next few years.

"We intend to leverage this Fund-supported climate change reform program to issue environmental, social and governance bonds," he says.

"We also believe that this can set an example for neighboring countries or those facing similar climate risks, as the RSF is an instrument that responds to a real need and has a significant impact in the medium- and long-term."

Learn more about IMF's Resilience and Sustainability Facility to support countries address longer-term challenges, including those related to climate change.

Aging is the Real Population Bomb

(ADOBE STOCK/DMYTRO)

This week, the global population passed 8 billion. The progression from 7 to 8 billion people took a mere 12 years, conjuring up long-standing fears associated with rapid population growth, write Harvard’s David Bloom and Leo Zucker in an F&D online exclusive.

But the most formidable demographic challenge facing the world is population aging. Thoughtful preparedness can enable countries to meet the challenge and take advantage of the opportunities presented by demographic change, they write.

“Population aging presents, together with its challenges, opportunities for societies to reorient and reinvigorate.”

Read the full article

Finance & Development, the IMF's flagship magazine and online editorial platform, publishes cutting-edge analysis and insight on the latest trends and research in international finance, economics, and development. It is written by both IMF staff and prominent international experts, and is read by leading policymakers, academics, economic practitioners, and other decisionmakers around the world.

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Climate Finance

Emerging and developing economies need significant financing in coming years to reduce emissions and adapt to the physical effects of climate change. In a blog, IMF Deputy Managing Director Bo Li and co-authors discuss how blended finance can support their climate goals. “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,” they say.

Europe's Double-Digit Inflation

Inflation is high virtually everywhere, but what’s pushing prices to record levels in Europe is not necessarily what’s fueling inflation in the United States. Philip Lane is chief economist for the European Central Bank. In a podcast, he says finding the “sweet spot” between fiscal and monetary policies will allow for continued support to vulnerable Europeans hard hit by high energy prices and double-digit inflation without further straining public finances.

Prices and Prosperity

Price pressures pose the most immediate threat to present and future prosperity by pinching real incomes and undermining macroeconomic stability, Gita Gopinath said on Thursday. Central banks around the world must keep a steady hand, with monetary policy firmly focused on fighting inflation, the IMF’s first deputy managing director told the Caixin global summit. “The outlook could still worsen and policy trade-offs have become acutely challenging.”

Special Responsibility

Multilateral institutions have a special responsibility to build a more resilient world, the University of California’s Maurice Obstfeld said on the final day of the IMF’s annual research conference. “The world is now closer to tipping points of many kinds,” the economics professor told a panel discussion that also featured the IMF’s chief economist Pierre-Olivier Gourinchas, Harvard’s Carmen Reinhart and Jason Furman, and the European Central Bank’s Philip Lane. Watch a video of the discussion to hear what panelists said about the global outlook and find all the conference material here.

Global growth prospects are confronting a unique mix of headwinds, including from Russia’s invasion of Ukraine, interest rate increases to contain inflation, and lingering pandemic effects such as China’s lockdowns and disruptions to supply chains. Our latest World Economic Outlook lowered our global growth forecast for next year to 2.7 percent, and we expect countries accounting for more than one third of global output to contract during part of this year or next. As the Chart of the Week shows, there has been a steady worsening in recent months for purchasing manager indices that are tracking a range of G20 economies.

WEEKLY ROUND-UP

01. Sovereigns and Banks

The relationship between governments and the banks that lend to them has attracted increased attention in emerging market economies lately as bank holdings of sovereign debt have surged. A paper by IMF staff examines this “sovereign-bank nexus” to assess how it could amplify risks to financial stability. An increase in sovereign credit risk can adversely affect banks’ balance sheets and credit supply, especially in countries with less-well-capitalized banking systems, the authors conclude.

02. Wage-Price Spirals

As prices rise at the fastest pace for 40 years in many parts of the world, policymakers are becoming concerned by the possibility of wage-price spirals—when inflation leads to higher wage growth, fueling even higher inflation. But analysis of advanced economies since the 1960s by IMF staff shows that these episodes are relatively rare. “History suggests that nominal wages can accelerate while inflation recedes from high levels,” the authors say.

03. Guyana's Oil Wealth

Guyana's new-found oil reserves are set to transform its agricultural and mining economy but also throw up key policy challenges around management of its oil wealth. A study by IMF staff on the appropriate monetary policy and exchange rate framework recommends a gradual shift toward greater exchange rate flexibility. "It will allow the economy to better withstand shocks and maintain competitiveness", the authors conclude.

04. Haiti's Exchange Rate

A strong Haitian gourde between August to October 2020 saw a decline in headline inflation and some fuel subsidy savings for the government. But families dependent on remittances, exporters and Caribbean nation's net external buffers suffered. A IMF staff paper analyzes the factors behind currency appreciation, its spillovers on the economy, and recommends way to manage foreign exchange and boost balance of payments.

MARK YOUR CALENDAR

01. Richard Goode Lecture

Chicago university’s Michael Kremer will give this year’s Richard Goode Lecture on Nov. 30 at 9:30 a.m. ET. The lecture will examine the design of institutions to accelerate innovation and the use of field experiments as an effective tool to test and develop policies and products that address development challenges. Watch here.

Thank you again 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.

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