By George Magnus
Serial disappointments in emerging country growth rates since 2011 has forced the International Monetary Fund (IMF) to cut its five-year-ahead forecasts for a group of 153 emerging and low-income developing countries on six occasions since late 2011 (see chart).
However, in its latest World Economic Outlook, the IMF again assumes that current disappointments will give way to restored equilibrium growth rates over the next five years. But what if there is no equilibrium and emerging market (EM) growth continues to disappoint? Continue reading »
When a country cuts power to its aluminium smelters so its people can watch the World Cup on TV, you have to conclude that its economic policy isn’t all about investing for the future.
Ghana this week called in the International Monetary Fund after a depreciation in its currency threatened to turn into a rout. The episode is an excellent illustration of the injunction to be careful what you wish for, in this case Ghana’s discovery of oil. Its fellow minerals exporter, copper-rich Zambia, has also called in the IMF.
The two nations have become object lessons in how easy outside financing and high but volatile export prices give countries enough rope to strangle themselves. Their experience is unlikely to be a bad as similar countries in previous decades, but it still represents another chapter in the sad history of resource-dependent economies going wrong. Continue reading »
When Zambia last week approached the International Monetary Fund for financial help, another cash-strapped African country was surely watching: Ghana.
Lusaka and Accra face similar problems: runaway fiscal deficits – the result of electorally-driven increases in public sector salaries – and a swelling current account deficit that is pressuring the exchange rate.
The market response to Zambia’s request should convince Ghana to seek help, too. Continue reading »
Latin America has been one of the great beneficiaries of the commodities supercycle of recent years. With the peak in that boom behind us, what is Latin America to do?
Structural reform, says Alejandro Werner, Western Hemisphere director at the IMF. As he told beyondbrics:
High growth in the last 10 years had a side effect – maybe [Latin America] didn’t push as fast as expected in structural reforms.
Continue reading »
Welcome to Ukraine. You’re running a rickety business, mainly cash-in-hand, that has a big gas bill and is losing money. Your shady Uncle Vlad says he will give you cheaper gas, lend you money on suspiciously favourable terms, and perhaps see his way to giving your workers an extra something in their pay packets. In return, all you have to do is back him up in family disputes in perpetuity. Meanwhile Christine, your steely-eyed bank manager, wants you to turn down the thermostat in your offices, lay off half your staff and stop fiddling the books.
Continue reading »
The International Monetary Fund is looking at sovereign debt restructuring, worried that it is bailing out private creditors. Gabriel Sterne, an economist at Exotix, explains to Fast FT deputy editor Robin Wigglesworth why the proposal for automatic bail-ins would not be wise.
Anyone reading the IMF’s latest update to its World Economic Outlook might come away worried about a repeat of the emerging market ructions in 2013 over the US scaling back its asset buying programme (aka tapering).
The Fund says that the world economy is “Not yet out of the woods”, and suggests that, for EMs, once the US Federal Reserve starts tapering in 2014, “portfolio shifts and some capital outflows are likely.” Continue reading »
Lagarde with Henry Rotich, Kenyan finance minister
IMF boss Christine Lagarde concludes a trip to Africa trip on Friday, continuing her tradition of starting the new year visiting one of the world’s fastest growing continents. For 2014, she chose Kenya and Mali, two very different economies on either side of Africa. Continue reading »
Another week, another barrage of criticism for Thailand’s massive rice subsidy scheme.
This time the attack on a programme that is costing the government billions of dollars a year and adding to worries about the country’s economy is delivered diplomatically, but none the less forcefully, by the International Monetary Fund. Continue reading »
Indonesia, the Philippines, Malaysia and Thailand are on the face of it a relatively homogeneous, integrated group of nations with similar trading partners. So why did the first two emerge from the 2008 financial crisis in a much better shape than the latter?
A working paper from the IMF concludes that it was because Indonesia and the Philippines were less open to trade and had greater fiscal stimuli. Continue reading »
The IMF may have outlined the risks to sub-Saharan Africa from tighter monetary policy in the US and other shocks (read the FT’s Javier Blas for the full story) – but as the report makes clear, it’s not just the US that has an impact on Africa’s fortunes.
There’s China too, of course. In a section titled Africa’s Rising Exposure to China: How Large Are Spillovers through Trade?, the Fund looks to quantify and group the countries most exposed to a China slowdown. Continue reading »
A landmark deal with Kosovo, a $3bn loan package from a new Emirati ally, a high-profile anti-corruption drive: Serbia has been filled with a new boldness in recent times.
It continued on Friday as the National Bank of Serbia cut its policy interest rate by half a point to 10.5 per cent, more than the expected quarter-point cut. The bank had held steady for the previous three months following reductions totalling 75 bp in May and June, as inflation fell from double figures. Continue reading »
By Dalibor Rohac of the Cato Institute
In the weeks leading to the Annual Meetings of the International Monetary Fund (IMF) and the World Bank last weekend, Christine Lagarde, the managing director of the Fund, has been making a lot of headlines. She announced that the IMF would push for more gender equality in labour markets around the world, suggested that the IMF could help protect the planet from environmental damage by promoting reforms of energy subsidies, and urged European countries to move towards a fiscal union in order to help eurozone limit the severity of future financial crises.
That is a lot of ground to cover. While each of these proposals should be discussed on its own merit, jointly they are symptomatic of the spectacular mission creep that characterises the past 40 years of the organisation’s existence. Continue reading »
Sri Lanka watched nervously as India’s rupee plunged, not least because it too suffers from the high current account and fiscal deficit mixture that turned investors sour on its larger neighbour.
Now India’s currency is recovering, and Sri Lanka seems emboldened too, as its central bank today shunned IMF advice and surprised forecasters by cutting rates by half a percentage point. But is it a cut too far? Continue reading »
The IMF’s World Economic Outlook caused a bit of a stir this week, given the gloomy outlook for emerging economies.
But within the Fund’s number crunching a few things were a little overlooked. Such as the rather drastic revisions to some GDP forecasts from the previous April outlook. Look away Libya, hello Turkmenistan. Even some major EMs got a significant downward shift. Chart of the week takes a look at the difference 6 months can make. Continue reading »