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Dear Colleague,
In today's edition we hear how continued support will be critical for recovery in the United Kingdom, explore new analysis of the pandemic's effect on inequality in developing economies, hear more about the impact and opportunity of the crisis in sub-Saharan Africa and the Middle East and North Africa, how firms view sustainability amid a crisis, among many other highlights. On that note, let's dive right in.
đŁ But first, starting at 11:15 AM EDT, IMF Managing Director Kristalina Georgieva discusses global economic prospects and the COVID-19 response and recovery with Center for Global Development President Masood Ahmed. Watch it live here.
IMF 2020 CONSULTATION WITH THE UNITED KINGDOM
At a press conference at the conclusion of the IMF mission for the Article IV consultation with the United Kingdom, IMF Managing Director Kristalina Georgieva made a clear appeal for the need to maintain support in the face of a continuing crisis.
"My main message today is that continued policy support is essential to address the pandemic and to sustain and invigorate a recovery. We welcome that the authorities have committed to deliver it as long as necessary to manage expectations and boost confidence. The policy space exists to do this," she said in her opening remarks.
On Brexit:Â "We strongly encourage the UK and EU authorities to make every effort to reach an agreement. Progress on a range of issues has been made over the past year and there is room for a compromise beneficial to both sides. A solution would remove important downside risks from the outlook," she said.
Georgieva, UK Chancellor Rishi Sunak, and IMF UK Mission Chief Mark Flanagan took questions on the preliminary findings of the 2020 Article IV Consultation. In addition to maintaining support, MD Georgieva also supported an additional fiscal push, the need to begin thinking about rotating policy toward fiscal adjustment, and keeping monetary policy accommodative. Read the full staff concluding statement here.
INEQUALITY IN EMERGING MARKETS
The COVID-19 pandemic is jeopardizing growth and gains emerging markets and developing economies made in recent decades. Measures to contain the virus are also threatening to widen inequality in these countries where deep disparities already existed.
In our most recent IMF Blog, we explore two facts about the current pandemic to estimate its effect on inequality: a personâs ability to work from home and the drop in GDP expected for most countries in the world.
Analysis in our latest World Economic Outlook tells us is the estimated effect from COVID-19 on the income distribution is much larger than that of past pandemics. It also provides evidence that the gains for emerging market economies and low-income developing countries achieved since the global financial crisis could be reversed. The analysis shows that the average Gini coefficient (a measure of income distribution) for emerging market and developing economies will rise to a level comparable to that in 2008. The impact would be larger for low-income developing countries despite slower progress since 2008.
HELPING AFRICAN COUNTRIES FIND A PATH FORWARD
The Director of the IMF's African Department, Abebe Aemro Selassie, discussed in a podcast with Reuters Global Economics Editor Swaha Pattanaik how the IMF is helping hard-hit countries in sub-Saharan Africa, debt difficulties, the need for reforms, and why policy choices are more limited than in advanced economies.
"This year really is about protecting lives and livelihoods. That has to come first and foremost," he said, but added that the IMF is working with countries to "find a path forward that will protect countries from having to do too much adjustment--the burden of this debt falling on the poor, the vulnerable and getting creditors to provide as much debt relief as countries need."
Sub-Saharan Africa is projected to have -3 percent growth in 2020. 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. Read the full outlook report here.
MENA REGION AT A CROSSROADS
IMF Chief Economist Gita Gopinath and Director of the IMF's Middle East and Central Asia Department Jihad Azour participated in an October 27 event focusing on challenges and policy priorities for the Middle East and North Africa region. The discussion also included Reza Moghadam, Vice Chairman of Global Capital Markets, Morgan Stanley, and Nasser Saidi, Founder and President, Nasser Saidi & Associates.
âI think we are at one of those crossroads where if things are used to the right purpose, accelerating some of the transformational reformsâreforming, for example, the labor market; improving access to finance; introducing greater space for small- and medium-sized companies by redesigning the role of the stateâall of these reform opportunities could bring the region up to a new cycle of growth," Azour said of Gulf Cooperation Council countries.
Watch the full event and read the REO report here.
Seven things to know: This latest IMF Country Focus piece breaks down the things you need know about the fiscal challenges ahead for the region, ranging from where countries put fiscal support to what higher deficits will mean for economies.
As highlighted in the IMF's Regional Economic Outlook, the region's oil exporters suffered a double whammy of the economic impact of lockdowns and the resulting sharp decline in oil demand and prices. Growth in the region is projected to fall by 4.1 percent in 2020, a contraction that is 1.3 percentage points larger than projected in April 2020.
The view from the Caucasus and Central Asia:Â The IMF's Azour also spoke this week on how countries in the Caucasus and Central Asia are coping with the COVID-10 pandemic. The event featured Baurzhan Bektemirov, Chief Economist, Astana International Finance Center; Martin Galstyan, Chairman, Central Bank of Armenia; and Aziza Umarova, CEO, SmartGov Consulting. Watch the full event here.
HOW FIRMS STAY GREEN IN THE FACE OF CRISIS
The COVID-19 pandemic is being billed as a transformational moment for pursuing policies to combat climate change, but how have firms' environmental performance fared in past crises?
Our latest Chart of the Week Blog shows that the correlation is not necessarily positive. AÂ sudden jump in global financial stress and uncertaintyâcomparable to the average level that prevailed in the first half of 2020âwould lead to a drop in firmsâ environmental performance, reversing gains made over the last decade. Critically, the pre-shock environmental performance level is not regained even three years after the shock. The analysis also found that when economic output declined, so too did firmsâ environmental performance.
What to do? To offset any potential deterioration in firmsâ environmental performance, it will be crucial to put in place climate policies that alleviate firmsâ financial constraints and aid green investment. Policies aimed at fostering sustainable finance will also be key.
JOSEPH STIGLITZ ON INEQUALITY
In our latest issue of F&D, professor at Columbia University and a recipient of the Nobel Memorial Prize in Economic Sciences Joseph Stiglitz writes that the pandemic has laid bare deep divisions, but itâs not too late to change course.
"COVID-19 has not been an equal opportunity virus: it goes after people in poor health and those whose daily lives expose them to greater contact with others. And this means it goes disproportionately after the poor, especially in poor countries and in advanced economies like the United States where access to health care is not guaranteed," he writes. "One of the reasons the United States has been afflicted with the highest number of cases and deaths is because it has among the poorest average health standards of major developed economies, exemplified by low life expectancy (lower now than it was even seven years ago) and the highest levels of health disparities."
Read the full 1700-word article. Prefer the PDF? Click here to download.
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MARK YOUR CALENDAR
The IMF will hold the 21st Jacques Polak Annual Research Conference virtually on November 5-6.
This yearâs conference will focus on âLiving in the Extreme: Economics of Pandemics, Climate Change and Tail Risks.â Highlights of the agenda include the Mundell-Fleming Lecture by World Bank Chief Economist Carmen Reinhart with an introduction by IMF Chief Economist Gita Gopinath. IMF Managing Director Kristalina Georgieva will also moderate a panel on policy responses to climate-related disasters with former Bank of England Governor Mark Carney and William Nordhaus of Yale University.
Registration for the conference is open until November 2.
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
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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