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Dear Colleague,
In today's edition, we highlight:
- Managing Director in Ukraine
- Global economy at turning point
- Gold, silver and stability
- Crypto's promise
- Democracy and growth
The Weekend Read will take a break next week but return on Friday, March 10.
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UKRAINE
(Credit: @KGeorgieva/Twitter)
Kristalina Georgieva praised President Volodymyr Zelenskyy and his officials for their steadfast leadership and management of the economy during a visit to Ukraine’s capital, Kyiv.
The IMF management director’s visit came almost one year after Russia’s invasion, which has inflicted terrible human and economic suffering, and days after Fund staff praised Ukraine’s strong performance under its monitoring program, paving the way to a full program.
Georgieva, who also met leaders from civil society, parliament and the private sector, said she saw an economy that continues to function despite the challenges.
“Shops are open, services are being delivered and people are going to work. This is remarkable testament to the spirit of the Ukrainian people.”
The managing director reiterated the IMF’s unwavering commitment to continue supporting Ukraine.
In December, Ukraine’s central bank governor Andriy Pyshnyy spoke to Country Focus in Washington about the challenges of managing a war economy.
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GLOBAL OUTLOOK
(Credit: Prisma/Adobe Stock)
Emerging economies are supplying much of the momentum for global growth and will account for about four-fifths of economic expansion this year, the IMF's managing director wrote in a blog ahead of a meeting of Group of Twenty finance ministers and central bank governors in the Indian city of Bengaluru. Â Â
Kristalina Georgieva said that this year could be a turning point for the global economy, but growth is still low, price pressures persist and too many economies are still hurting badly after three years of shocks.
About 45 percent of low-income countries are at high risk of debt distress and about 25 percent of emerging economies face default-like borrowing spreads, she added.
The managing director appealed for a united front to support vulnerable people and economies.
“We need to find common ground even as geopolitical tensions are rising. And we need to steer clear of zero-sum policies that would only leave the world poorer and less secure.”
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GLOBAL OUTLOOK
Signs of resilience
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The global economy is expected to slow, but there are also signs of resilience. Watch our latest Charts in Motion video to get the latest growth projections for the world economy. |
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ASIA PACIFIC OUTLOOK
(Credit: Michael Discenza/Unsplash)
The economic headwinds that faced Asia and the Pacific last year have started to fade, making the region a bright spot in a slowing global economy, the director of the IMF’s Asia and Pacific Department, Krishna Srinivasan, writes in a blog.
As global financial conditions ease, food and oil prices fall, and China’s economy rebounds, Asia’s growth is set to accelerate to 4.7 percent this year from 3.8 percent in 2022, according to the IMF’s latest regional economic outlook.
But even though the short-term outlook has brightened, important longer-term challenges remain, including slower growth in China from 2024 onwards, which will weigh on growth prospects across Asia’s highly integrated supply chains and around the world.
As Srinivasan says, “This will make reforms to boost productivity and long-term growth more urgent across Asia.”
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FINANCE & DEVELOPMENT
(Credit: Bjorn Wylezich/Adobe Stock)
The shift from bimetallism—the use of both gold and silver currencies—to a gold standard among leading industrial nations in the 1870s has implications for today, writes Johannes Wiegand for Finance & Development magazine.
Bimetallism operated smoothly as long as the financial environment was stable and only one country needed to sustain it. When the going got tougher, maintaining bimetallism would have been beneficial, but the required international cooperation failed, he writes.
“While today’s monetary system operates very differently from that of the 19th century, monetary stability remains a global public good, which requires international cooperation.”
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Coming Soon: F&D's March Edition
(Credit: March Cover Pete Reynolds)
With inflation resulting from the COVID-19 pandemic and Russia’s invasion of Ukraine forcing a re-think of how central banks conduct monetary policy, the March edition of F&D Magazine focuses on New Directions for Monetary Policy. Authors include Gita Gopinath, Raghuram Rajan, Markus K. Brunnermeier, Masaaki Shirakawa, Christoffer Koch, Greg Kaplan, Giancarlo Corsetti, Michael Weber, Claudio Borio, and many more.
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Alan Blinder, former Fed vice chair and one of the world’s most influential economists, says cooperation between monetary and fiscal policy is crucial, but it's not always the case. |
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CRYPTO ASSETS
(Credit: Xijian/iStock by Getty Images)
Crypto assets have been more of a disappointment than a revolution for many users, and global bodies including the IMF and the Financial Stability Board urge tighter regulation.
Yet some of the rapidly evolving technology behind crypto may hold greater promise, Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, writes in a blog.
The the public sector should leverage technology to upgrade its payment infrastructure and ensure interoperability, safety, and efficiency in digital finance, as Adrian and co-authors noted in a recent paper.
“Crypto was fueled by an attempt to circumvent intermediaries and public oversight,” Adrian says.
“Ironically, its real value may come from the technology that the public sector can leverage to upgrade payments and financial infrastructure for the public good”.
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Persistent growth in wages and prices may feed off one other, leading to a wage-price spiral in which inflation rises ever higher. However, as the Chart of the Week shows, only a few episodes with dynamics similar to those seen in advanced economies after the pandemic were followed by wage-price spirals. In most cases, nominal wages caught up while inflation ticked down over several quarters, allowing inflation-adjusted wages to gradually recover. A sustained acceleration of wages and prices was rare.Â
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Weekly Roundup
SPECIAL DRAWING RIGHTS
The Caribbean Development Bank, the Development Bank of Latin America, the European Bank for Reconstruction and Development, the European Investment Bank, and the Inter-American Development Bank have become prescribed holders of Special Drawing Rights. Prescribed holders may acquire, hold and use SDRs in operations with other prescribed holders and participants in the SDR Department, which currently includes all IMF members.Â
STAFF PAPER
Major collapses in economic outlook are costly and frequent in the developing world. A new IMF staff paper finds that growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy; and stagnation under autocracy can give way to outright collapse. Democratic countries appear to be more resilient.
STAFF PAPER
A new IMF staff paper focuses on recent experience with crypto assets and central bank digital currencies in Latin America and the Caribbean. Crypto assets imply more risks than benefits but should be expected to continue to be part of the payment system’s landscape. By contrast, CBDCs could help achieve some public policy objectives, including facilitating remittances, the authors say.
STAFF PAPER
A new IMF staff paper uses life satisfaction data to help inform the design of climate mitigation policies in the United Kingdom. Results show that increases in nitrogen dioxide and particulate matter significantly decrease the odds of long-term happiness and short-term mental health wellbeing. The willingness to pay for clean air is also significant and increases with level of education.
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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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