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Dear Colleague,
In today's edition, we highlight:
- Georgieva on growth and cooperation
- Japan's economy
- An economist on inequality
- Chile's reforms
- Developing Ukraine's policymaking capacity
- Energy, inflation, and climate
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MIDDLE EAST AND NORTH AFRICA
(Credit: IMF)
The Fund expects GDP growth in the Middle East and North Africa region to reach 2.9 percent this year—higher than last year, but still below October projections, IMF Managing Director Kristalina Georgieva noted in a speech to the Eight Annual Arab Fiscal Forum in Dubai.
This is largely due to short-term cuts in oil production, the Gaza-Israel conflict, and tight monetary policies, which are still needed, she said. Among exporters, slow growth outside the hydrocarbon sector is another factor. And declining oil demand will become an increasing headwind over the medium term.
"At a time of economic challenges, geopolitical tension, and war, it is so important that we plant seeds now—of growth and cooperation, of peace and prosperity."
Read the full speech
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IMF Economist Joyce Cheng Wong shares her insights on the topic of Economic Growth in this episode of Ask an Economist. |
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JAPAN
(Credit: IMF)
Japan's period of low inflation and weak domestic demand is coming to an end, with demand now aligned with the economy’s capacity, said IMF First Deputy Managing Director Gita Gopinath in remarks at the conclusion of the Article IV mission to Japan.
The Fund projects 1 percent growth for Japan this year, a slight uptick from the last forecast. Core inflation will likely remain above the 2 percent target until the second half of 2025 as price increases are now broad-based across goods and services—fueled by robust demand, Gopinath noted.
In a concluding statement, IMF staff said that thanks to a strong labor market, wages have been growing at their fastest pace since 1995. The government will need to balance the budget, including by limiting untargeted transfers while enhancing revenue collection. Structural reforms are crucial for advancing women’s leadership, boosting innovation, and facilitating the transition to a green economy, staff added.
Watch the press conference and read the transcript
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 In a podcast recorded last summer, Columbia's Noah Kaufman saw a need to redesign international trade rules so that protectionism does not to become an unintended consequence of green industrial policy.Â
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INEQUALITY
(Credit: Porter Gifford)
Harvard’s Lawrence F. Katz sparked two intellectual revolutions in economics. One was to apply economic theories of supply and demand to explain fluctuations in wage inequality. The other was to lead large-scale field experiments involving real people to answer big questions such as the effects of moving to a higher-opportunity neighborhood.
Journalist Bob Simison profiles Katz for our People in Economics series in IMF Finance and Development Magazine. This article appeared in the December issue of F&D.
From Nobel laureates to rising stars, F&D's People in Economics series profiles the most exciting economists of our time, pinpointing their key contributions to the profession's ongoing evolution.
UKRAINE
(Credit: IMF)
The Ukraine Capacity Development Fund (UCDF), a trust fund managed and administered by the IMF, has been formally launched in Kyiv. The UCDF will provide substantial resources for the scaling up of technical assistance and training in support of the Ukrainian government’s reform agenda. Current resources in the amount of US$16.5 million are being provided by The Netherlands, Slovakia, Latvia, Japan, and Lithuania.
“Today’s launch of the IMF’s Ukraine Capacity Development Fund operations in Kyiv marks a key milestone in multilateral efforts to support the Ukrainian government’s ambitious economic reform agenda,” said IMF Managing Director Kristalina Georgieva.
Ukraine Minister of Finance Sergii Marchenko added that “Macroeconomic stabilization, strong post-war recovery, and EU accession are essential for a prosperous Ukraine. The Capacity Development Fund established by the IMF will equip us with valuable expertise to advance our goals.”
CHILE
(Credit: Tamara Merino/IMF Photo & tifonimages/iStock by Getty Images)
Renewable energy and higher investments can boost growth, and support conditions toward a more inclusive economy in Chile, write the IMF's Luiza Antoun de Almeida, Si Guo and Andrea Schaechter in an IMF Country Focus article.
Strong policies have successfully brought down high inflation and reduced the large current account deficit that emerged during the pandemic, while increases in social benefits have provided some relief in response to discontent over inequality. However, investment and growth are still tepid and social gaps remain high, they write.
"Going forward, Chile—the world’s largest copper producer, second largest lithium producer, and richly endowed with solar and wind—can both contribute to, and benefit from, the global green transition. A more dynamic and greener economy could also create conditions for greater equity and inclusion."
Read the full article
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Ensuring a lower-carbon future is not only necessary but also good for the economy. As our chart—published in December—shows, making an orderly transition to net zero by 2050 could result in global gross domestic product being 7 percent higher than under current policies.
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Weekly Roundup
ENERGY
When global energy prices spiked in 2022, many governments announced measures to support companies. A new IMF staff paper investigates firms’ resilience to the energy shock and their response to fiscal support, based on surveys from the United States and Germany. “Firms in energy-intensive industries would have been significantly more affected if international energy prices were fully passed through to domestic prices in Europe,” the authors write.
INFLATION
An IMF staff paper studies how and why inflation expectations have changed since the emergence of Covid-19. Using micro-level data, the authors show that the distribution of consumer expectations at one-year and five-ten year horizons has widened since the surge of inflation during 2021, along with the mean. Persistently high and heterogeneous expectations of consumers with less education and lower income are mainly responsible.
CLIMATE
The financial sectors of the Middle East and Central Asia countries should play an important role in supporting climate-related policies for the region, an IMF paper finds. The sectors are vulnerable to downside risks from climate-related shocks and at the same time offer the potential to help fill the financing gap for needed adaptation and mitigation strategies. Successful approaches to climate change in the region therefore need to coherently integrate financial sector strategies within the overall policy framework.
ABOUT THE IMF
The IMF provides financial support to countries hit by crises to create breathing room as they implement policies that restore economic stability and growth. It also provides precautionary financing to help prevent crises. IMF lending is continuously refined to meet countries’ changing needs. Read the factsheet to learn more.
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FEBRUARY 21 | 9:30 AM ET | 2:30 PM UTC
Ceyla Pazarbasioglu, Director of the IMF's Strategy, Policy and Review Department, will participate in a panel discussion following the Institute for International Finance's launch of its flagship report, Global Debt Monitor: Politics, Policy and Debt Markets - What to Watch in 2024.
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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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Miriam Van Dyck
Editor
IMF Weekend Read
mvandyck@imf.org
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