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Dear Colleague,
In today's edition we wrap up the 2020 Annual Meetings with a focus on digital currencies, the impact of lockdowns on jobs, and the launch of our Regional Economic Outlook reports for the Middle East and Central Asia, Europe, Asia and the Pacific, sub-Saharan Africa, and the Western Hemisphere, among many other highlights. On that note, let's dive right in.
đŁ But first, starting at 9:00 AM EDT, IMF Monetary and Capital Markets Department Director Tobias Adrian and Deputy Director Fabio Natalucci discuss the analytical chapters of their latest Global Financial Stability Report, including the impact of COVID-19 on the banking system. The conversation is moderated by Yahoo Finance's Brian Cheung. Watch it live here.
THE FUTURE OF CROSS-BORDER PAYMENTS
âWe have a chance to improve cross-border payments with huge benefits, especially for many of the worldâs poorest people," said IMF Managing Director Kristalina Georgieva earlier this week as she moderated a lively panel discussion on the advent of digital currencies and its implications for the future of cross-border payments, the benefits and challenges associated with the central bank digital currency (CBDC), the importance of global policy coordination, and the role of the private sector. Speakers included, Ahmed Abdulkarim Alkholifey, Governor, Saudi Arabian Monetary Authority; AgustĂn Carstens, General Manager, Bank of International Settlements; Jerome Powell, Chair, Federal Reserve; Nor Shamsiah Yunus, Governor, Central Bank of Malaysia.
With many central banks investigating the possibility of issuing CBDCs, the panelists stressed that careful consideration should be given to their costs and benefits. For example, Powell noted the U.S. Federal Reserve takes a cautious approach and has not yet decided on introducing CBDCs. He stressed that besides the benefits, there are also some difficult policy and operational questions that need to be thoroughly evaluated, including cyber-attacks as well as the impact on monetary policy and financial stability. Alkholifey noted that CBDCs could help enhance the resilience and efficiency of cross-border payments, and that Saudi Arabia has launched a pilot project with the United Arab Emirates to explore how modern technologies could help improve cross-border payments.
Watch the discussion here to learn more, and view the full conference agenda, which includes video links to discussions on the role of the public and private sector, as well as how best to outline a global roadmap on these issues moving forward.
THE GREAT LOCKDOWN AND JOBS
Many jobs have been lost during the COVID19 crisis. In this very informative, 20-minute data visualization panel moderated by CNBC's Silvia Amaro, IMF Chief Economist Gita Gopinath and Vodafoneâs Joakim Reiter look at what the data shows about which groups have been more affected by the lockdowns. What they reveal may surprise you.Â
REGIONAL ECONOMIC OUTLOOK: MIDDLE EAST AND CENTRAL ASIA
As analyzed in our new Regional Economic Outlook, while countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region and those in the Caucasus and Central Asia (CCA) responded resolutely and swiftly to save lives and stepped in with unprecedented policies to cushion the negative economic impact of containment policies, challenges abound.
Oil exporters were particularly hard hit by a âdouble-whammyâ of the economic impact of lockdowns and the resulting sharp decline in oil demand and prices. Containing the health crisis, cushioning income losses, and expanding social spending remain immediate priorities. However, governments must also begin to lay the groundwork for recovery and rebuilding stronger, including by addressing legacies from the crisis and strengthening inclusion.
Moreover, the threat of economic scarringâlong-term losses to growth, employment, and incomesâis a key concern. In particular, we estimate that five years from now countries could be 12 percent below the GDP level expected by pre-crisis trends. Whatâs more, for countries that depend heavily on the battered tourism sector, both baseline GDP and employment could go down by 5 percentage points this year, with effects lingering over the next 2-5 years, while poverty could rise by more than 3½ percent in 2020 if remittances do not rebound. Watch the press conference, read the blog and access the full report.
REGIONAL ECONOMIC OUTLOOK: EUROPE
The pandemic is exacting a heavy toll on Europe. More than 240,000 people have lost their lives. Millions have suffered the illness themselves, the loss of loved ones, or major disruption in their work, their businesses, and their daily lives.
The economic impact of the pandemic has been enormous. Our latest Regional Economic Outlook for Europe forecasts a 7 percent decline in Europeâs GDP in 2020. The recovery from this crisis will be uneven and partial. While real GDP is projected to rebound by 4.7 percent in 2021, it would still be lower by 6.3 percent for 2021 relative to our pre-pandemic projections, implying a GDP loss of almost 3 trillion euros. Much of this loss will not be recouped over the medium term.
An unprecedented policy response, both in swiftness and scale, prevented a more devastating outcome. To give just one example: we estimate that at least 54 million jobs have at some stage been supported by job retention schemes in Europe. This has kept many families and firms afloat in these difficult times. EU-wide policies also made a difference. Risks remain significant and are rising as a second wave of infections is intensifying. Given the considerable uncertainty, policies must stay resolutely supportive to sustain the recovery. Watch the press briefing, read the blog, and access the full report.
REGIONAL ECONOMIC OUTLOOK: ASIA AND THE PACIFIC
The Asia-Pacific region is recovering from its worst recession in living memory. Our latest Regional Economic Outlook shows that a recovery started in the third quarter, but growth engines are not all firing with the same power across countries, leading to a multispeed recovery.
Reflecting worse-than-expected outturns in the second quarter in a few countries, the IMFâs forecast for the region has been downgraded to -2.2 percent in 2020âthe worst outcome for this region in living memory. Indiaâs economy experienced a much sharper than expected contraction in the second quarterâ24 percent on a year-over-year basisâand is expected to recover slowly in the coming quarters. China, which suffered the pandemicâs blow earlier than other countries, has seen a strong recovery after the first quarter lockdown, and growth has been revised up to 1.9 percent this year, a rare positive figure in a sea of negatives.
Advanced economies (Australia, Korea, Japan and New Zealand), while still in recession, are expected to do somewhat better than expected in 2020, reflecting a faster pickup in activity following earlier exit from lockdowns. Watch the press briefing, read the blog, and access the full report.
REGIONAL ECONOMIC OUTLOOK: SUB-SAHARAN AFRICA
The COVID-19 pandemic represents an unprecedented health and economic crisis for sub-Saharan Africa. Within months, the spread of the virus has jeopardized years of development and decades-long gains against poverty in the region while threatening the lives and livelihoods of millions of people.
In our latest Regional Economic Outlook, we project -3 percent growth in sub-Saharan Africaâs GDP in 2020, representing the worst outcome on record for the region. The drop will be even larger for economies dependent on tourism and commodity exports. Growth in the region should rebound modestly in 2021 to 3.1 percent, but for many countries, a return to 2019 levels wonât occur until 2022â24.
Countries in the region acted swiftly to protect their people from the worst of the crisis, but lockdown measures came with high economic and social costs. Policymakers in sub-Saharan Africa now face the added challenge of rekindling their economies with fewer resources and more difficult choices.
As the region looks toward the future, uncertainty over the path of the pandemic continues to loom over an enduring recovery. The top policy priority should be saving lives and protecting livelihoods through health spending and income and liquidity support for households and businesses. Even with limited funds, policymakers acted swiftly with what they had. Watch the press conference, read the blog, and access the full report. You can also listen to a new 17-min podcast on this report.
REGIONAL ECONOMIC OUTLOOK: WESTERN HEMISPHERE
COVID-19 has hit Latin America and the Caribbean harder than other parts of the world, both in human and economic terms. The relatively large human toll is evident: with only 8.2 percent of the world population, the region had 28 percent of cases and 34 percent of deaths, by end-September.
Our new Regional Economic Outlook: Western Hemisphere projects a real GDP contraction of 8.1 percent in 2020. Unlike in previous recessions, employment contracted more strongly than GDP in the second quarter of 2020, 20 percent on average for the five largest countries, and up to 40 percent in Peru.
Two structural characteristics of Latin American and the Caribbean economies contributed to the relatively larger economic impact: comparatively more people work in activities that require close physical proximity, and less people have jobs in which teleworking is feasible. Almost 45 percent of jobs are in contact-intensive sectors (like restaurants, retail stores, or public transportation), compared to just over 30 percent for emerging markets. In reverse, only about one in five jobs can be done remotely, half the share of advanced economies and below the emerging world average (26 percent).
These two features, in addition to a high degree of informality and poverty, and combined with lower trade and financial turbulence caused by the ailing global economy, contributed to the historic collapse in activity. Watch the press conference, read the blog and access the full report.
CAPACITY DEVELOPMENT TALKS: CARIBBEAN AND COLOMBIA
In the first of two CD talks this week, a panel of IMF staff, officials, and external partners discussed how best to build resilience to natural disasters and climate change in the Caribbean. In the second, Colombian authorities discussed how they honed their macroeconomic framework to better mitigate the impact of COVID-19. Interested in more CD talks? Click here.
MICHAEL KREMER ON THE URGENCY OF INVESTING IN VACCINES
In the early 2000s, Nobel Laureate Michael Kremer helped develop the design of advance market commitment models (AMCs). They were used to incentivize the private sector to work on issues of relevance for the developing world by pledging that if they developed an appropriate vaccine, funds would be available for those countries to purchase it. The approach resulted in billions of dollars being devoted to pneumococcal vaccines for strains common in developing countries, saving hundreds of thousands of lives.
Kremer's latest research focuses on how to expedite the production and distribution of the COVID-19 vaccines immediately following successful medical trials. In this new podcast, Kremer says at-risk investment into vaccine manufacturing capacity before clinical approval would advance vaccine distribution by 6 months or more. Listen to the 25-min podcast here or read the transcript.
ANDORRA:Â THE IMF'S 190th MEMBER
The IMF just welcomed the Principality of Andorra as its newest member. Andorraâa microstate situated between France and Spainâjoined the IMF when Elisenda Vives BalmaĂąa, Ambassador of Andorra to the United States, Canada, and Mexico, and Permanent Representative of Andorra at the United Nations, signed the IMFâs Articles of Agreement at a ceremony in Washington, D.C.
Andorra applied for membership to the IMF in January 2020. The process, which included collecting economic information for the calculation of Andorraâs quota, was completed virtually due to the travel restrictions related to COVID-19. Several IMF departments worked together to make this happenâEuropean, Finance, Legal, Secretaryâs, and Statistics.
Membership allows the Andorran government to benefit from IMF policy advice, especially as the country tackles the crisis caused by COVID-19 and develops policies for a sustained recovery. In particular, the country can now receive an annual review or âhealth checkâ of its economy by the IMF, tap technical assistance, and access IMF lending if needed.
Interested in learning more about Andorra? Here are five things you may not know.
IMF LENDING
Check out our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19. We are also regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMFâs Executive Board.
To date, 76 countries have been approved for emergency financing, totaling over US$31 billionâthe most recent approval was in the amount of US$ 156 million to Cameroon to address the impact of the COVID-19 pandemic. Looking for our Q&A about the IMF's response to COVID-19? Click here. We are also continually producing a special series of notesâmore than 50 to dateâby IMF experts to help members address the economic effects of COVID-19 on a range of topics including fiscal, legal, statistical, tax and more.
FINAL THOUGHT
In case you missed it, last Friday's round-up was another jam-packed summary of the Annual Meetings, so be sure to take a look if you missed it.
Thank you again very much for your interest in the Weekend Read. We really appreciate your time. If you have any questions, comments or feedback of any kind, please do write me a note.Â
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Sincerely,
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