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Dear Colleague,
In today's edition, we highlight:
- Monetary policy challenges
- Green innovation
- Europe and China outlooks
- G20 growth reforms
- Quota increase, climate financing, macroeconomic uncertainty, and more
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CENTRAL BANKS
(Credit: IMF Photo/Joshua Roberts)
The US Federal Reserve will avoid “the risk of being misled by a few good months of data” and will not hesitate to tighten policy further if appropriate, Chairman Jerome Powell said at the IMF’s Annual Research Conference.
Powell spoke on a panel alongside IMF First Deputy Managing Director Gita Gopinath, Bank of Israel Governor Amir Yaron, and Harvard’s Ken Rogoff. The discussion was moderated by IMF Economic Counselor Pierre-Olivier Gourinchas.
Gopinath spoke of the challenges facing monetary policy in today's uncertain environment. Yaron discussed the difficulties of conducting monetary policy in a small open economy, like Israel. Rogoff emphasized the importance of central bank independence, adding that central bankers have to constantly fight for it.
This year’s 24th Jacques Polak Annual Research Conference is being held in honor of Rogoff’s contributions to economic research and policy. Watch opening remarks from IMF Managing Director Kristalina Georgieva and Gopinath here.
Tune in here at 1:30 PM ET on Friday November 10 to watch Princeton’s Mark Aguiar deliver the keynote Mundell-Fleming Lecture.
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CLIMATE CHANGE
(Credit: Teamjackson/iStock by Getty Images)
Making low-carbon technologies cheaper and more widely available is crucial to reducing harmful emissions, but momentum in green innovation has slowed recently and promising technologies aren’t spreading fast enough to lower-income countries, IMF economists write in a blog.
Green innovation peaked at 10 percent of total patent filings in 2010 and has experienced a mild decline since. This is concerning because, as the authors show in a staff discussion note, green innovation is not only good for containing climate change, but for stimulating economic growth too.
“Our research shows that doubling green patent filings can boost gross domestic product by 1.7 percent after five years compared with a baseline scenario. And that’s under our most conservative estimate—other estimates show up to four times the effect.”
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Navigating an economy through multiple crises is not for the faint-hearted. Nigel Clarke has been Jamaica’s Minister of Finance since 2018 and led its economy through the pandemic as well as devastating natural disasters caused by climate change. In this podcast, Clarke sits down with IMF Western Hemisphere Department Director Rodrigo Valdés to discuss Jamaica’s strong track record of investing in institutions and prioritizing macroeconomic stability. The conversation took place as part of the IMF’s Governor Talks series held during the Annual Meetings in Marrakech. |
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EUROPE'S ECONOMIC OUTLOOK
Europe needs to improve productivity over the medium-term to maintain sustainable growth in wages. If not, wage growth could feed back into higher inflation and workers would be no better off, Alfred Kammer, the director of the IMF’s European Department, said on Wednesday.
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Speaking in Brussels at the launch of the department’s latest Regional Economic Outlook, Kammer told reporters that it’s important for economic recovery that wages catch up with prices.
But in Europe’s emerging market economies, wage growth needs to remain below double-digit rates next year and return to rates of not more than 6 percent after, he said.
“Our analysis also shows that in the current environment wage growth in emerging markets could easily overshoot levels consistent with productivity and lead to drawn out inflation and competitiveness losses.”
Read the European Department's blog on how countries can reconcile short-term wage pressures and long-term labor trends with low inflation.
CHINA'S OUTLOOK
(Credit: Wangfujing, Beijing-R.M.Nunes-iStock by Getty Images)
China’s economy is set to meet this year’s government growth target, reflecting a strong post-COVID recovery, Gita Gopinath, the IMF’s first deputy managing director, told a press briefing in Beijing on Tuesday.
Speaking after an annual consultation, Gopinath said that real GDP is projected to grow by 5.4 percent this year and 4.6 percent next year amid continued weakness in the property sector and subdued external demand. Those are upward revisions of 0.4 percentage points for both 2023 and 2024 relative to October projections.
“Supportive macroeconomic policies are needed to bolster activity amid the needed property sector adjustment and structural reforms to address local government debt. A reorientation of fiscal expenditures toward households and additional easing via interest rates would support growth and investment. Greater exchange rate flexibility would help absorb external shocks and strengthen monetary policy transmission.”
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AFRICA
(Credit: peeterv, Joesboy, AvGusT174/iStock by Getty Images)
China has forged deep economic ties with countries in sub-Saharan Africa over the past 20 years, but China’s economic performance has important implications for Africa, write IMF staff in a Country Focus blog.
A one percentage point decline in China’s growth rate could reduce average growth in the region by about 0.25 percentage points within a year, according to the latest Regional Economic Outlook. For oil-exporters, such as Angola and Nigeria, the loss could be 0.5 percentage points on average, the authors write.
“With geoeconomic fragmentation on the rise, sub-Saharan African countries will need to adapt to China’s growth slowdown and declining economic engagements by building resilience through increased inter-African trade and by rebuilding buffers, including through tax policy reforms and improvements to revenue administration.”
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FINANCE & DEVELOPMENT
(Credit: Christopher Pike/Bloomberg Para Getty Images)
A young, educated, and growing population—and some of the world’s highest mobile, internet, and smartphone penetration rates—point to fertile ground for financial innovation in the Middle East and North Africa, writes the Atlantic Council’s Amjad Ahmad in F&D Magazine.
"Yet despite such promise, the region lags in the use of digital banking and the adoption of fintech. Seizing the massive opportunity ahead means overcoming substantial challenges, among them a protective approach to regulation."
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Most Group of Twenty economies are likely to keep monetary policy appropriately tight to bring inflation back to target. As the Chart of the Week shows, pairing macroeconomic policy that’s tighter than currently planned in many economies—particularly advanced economies—with priority structural reforms can boost G20 economic output by as much as 0.7 percent over 2025-28 relative to current projections. That’s according to our latest report prepared for the group, whose members are responsible for about four-fifths of global gross domestic product.
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Weekly Roundup
IMF QUOTAS
The IMF’s executive board has proposed a 50 percent quota increase allocated to members in proportion to their current quotas. The quota increase would help safeguard global financial stability by enhancing the IMF’s permanent resources and reducing reliance on borrowed resources, a statement said.
CLIMATE CHANGE
$5 trillion in annual green investments are needed by 2030 to tackle climate change, IMF Financial Counselor Tobias Adrian told the Eastern Caribbean Central Bank's 40th anniversary global conference/Central Banking Autumn Meetings 2023 in St Kitts. Given that the majority of financing will need to come from the private sector, the IMF is working to "crowd in" finance through its own lending, including the Resilience and Sustainability Facility.
IMF DATA
IMF Data is now on LinkedIn. Follow us for reliable macroeconomic data, statistical guidance, training, and more. Stay tuned for IMF data releases, as well as information about the work of the institution on statistical events, data products and initiatives, collaborations with other institutions, and new statistical manuals or publications.
IMF DATA
The 9th Statistical Data and Metadata Exchange (SDMX) Global Conference held in Bahrain from Oct 29-Nov 2 explored how SDMX tools and technologies can be leveraged to enhance collaboration and knowledge sharing. IMF Director of Statistics Bert Kroese shared how the IMF is modernizing its data management tools using SDMX.
EURO AREA
An unexpected increase in macroeconomic uncertainty has a persistent negative impact on euro-area industrial production, accounting for 80 percent of its reduction during the first wave of COVID, according to an IMF staff paper. The paper also finds that an increase in macroeconomic uncertainty negatively affects countries in emerging Europe, contributing the most to the decline in their economic activity during this pandemic period.
RESOURCE-RICH COUNTRIES
An IMF staff paper revisits the debate on the design of fiscal rules in resource-rich countries. Its main objective is to assess alternative systems of rules against their policy objectives, while taking into account country characteristics. One of the contributions of the paper is to propose fiscal frameworks that are centered around the principle of insurance against shocks and less reliant on estimating precisely resource wealth, which tends to be highly volatile.
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NOVEMBER 15 | 10:00 AM EST
Join us for the official launch of PortWatch, an open platform designed to monitor and simulate trade disruptions from climate extremes and other shocks.
NOVEMBER 15-16
The forum will discuss how digitalization is impacting the future of money and the exchange of value, and what kind of policies and regulation are needed to ensure a stable and equitable financial system.
NOVEMBER 16-17
As sovereign debt levels reach unprecedented heights, this two-day conference aims to provide a forum to discuss the complex landscape fiscal policy is now facing.
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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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